Feller Rate assigns “1st class level 4” rating to the shares of Empresas Lipigas S.A. (“Lipigas”) which are in the process of registration and ratifies the solvency and bond ratings. The rating Outlook is “Stable”.
The “1st class level 4” rating assigned to the shares of Lipigas answers mainly, to the company’s “AA-” rating solvency, but restricted by the fact of being a new instrument without stock market statistics.
For its part, solvency ratings and bonds reflect the company’s leadership position in the Chilean market of liquefied gas, greater income diversification -thanks to its international expansion– and greater control of its supply sources, resulting from the new LPG Terminal in Quintero. It also incorporates the maintenance of a moderate indebtedness level, with stable margins and a “Satisfactory” liquidity position.
On the other hand, the solvency rating is restricted by an increased exposure to markets with greater relative risk and participation in an investment-intensive and competitive industry.
Empresas Lipigas S.A. is the largest liquefied petroleum gas (LPG) distributor in Chile, with a market share of 36.8%, with wide geographical coverage.
While in 2011 the company began its  international expansion process in Colombia and then in the year 2013, entered Peru, company revenues and Ebitda remain strongly concentrated in Chile, a country representing 72.4% and 76.9%, respectively, as of March 2015.
The company shows increased revenues, with margin stability during the past three years. However, at the end of 2014, the sharp decline in international oil prices during the last months of the year affected Ebitda margin, which reached 11.2%.
As of March 31, 2015, Ebitda margin recorded a strong recovery, reaching 17.1%, influenced by better conditions and prices for the supply of raw materials, which is strengthened by the entry into operation of the new terminal at Quintero.
Historically, the company has maintained very low indebtedness. However, the construction at the Quintero terminal and the international expansion project have involved an increase in financial debt in limited ranges. In this sense, as of March 31, 2015, financial indebtedness was 0.8 times, and financial debt coverage to Ebitda, 1.9 times.
The company presented major financial debt maturities for the year 2015, whereupon, in April of this year, it issued UF 3.5 million in bonds in the local market. These possess a 25 year bullet type structure, and were mainly used for the payment of these short-term financial liabilities.
BASE SCENARIO: the “Stable” rating prospects consider that the company will maintain a moderate indebtedness, with financial debt to EBITDA indicators less than 2.0 times.
UPSIDE SCENARIO: An improved rating could occur should the company incorporate less demanding liquidity or dividend policies, keeping its indebtedness levels.
DOWNSIDE SCENARIO: Feller Rate estimates that a lower rating is unlikely in the current scenarios.
Source: Feller Rate