"The downgrade is driven by the adverse effect on profitability and credit metrics from the further slowdown in the European construction industry amid a significant investment program by Masterplast," Scope said.
Scope noted that Masterplast had booked losses for the past four quarters amid declining sales in nearly all of the company's markets.
Masterplast's under-review status highlights "significant uncertainty regarding liquidity concerns the company may face in 2024", Scope said, pointing to the company's reliance on its ability to roll over its short-term bank facilities.
Scope intends to resolve the under-review status within three months, once Masterplast has addressed liquidity concerns.
A downgrade of at least one notch might result from the company failing to roll over at least some of its short-term debt, while the rating could be affirmed if liquidity can be sustained at or above 100%, requiring the rollover of short-term bank debt, Scope said.
Scope acknowledged measures Masterplast had taken to address the market downturn, including the suspension of dividend payments, cost cuts, and layoffs, and the optimization of production capacity and inventory levels. The measures should lead to the business stabilizing in 2024 as profit margins recover, Scope said.
Masterplast earlier issued three senior unsecured bonds with a combined volume of HUF 21 bln in the framework of the Bond Funding for Growth Scheme (BGS) of the National Bank of Hungary (MNB).
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