Scope Ratings GmbH (Scope) monitors and reviews its credit ratings on an ongoing basis and at least annually, or every six months in the case of sovereigns, sub-sovereigns and supranational organisations.

Scope performs monitoring reviews to determine whether material changes and/or changes in macroeconomic or financial market conditions could have an impact on the credit ratings. Scope considers all available and relevant information when undertaking the monitoring review.

Monitoring reviews are conducted by performing a peer comparison, benchmarking against the rating-change drivers, and/or reviewing the credit ratings’ performance over time, as deemed appropriate by the Lead Analyst or Analytical Team Head, in addition to an assessment of all aspects of the relevant methodology/ies, including key rating assumptions and model(s). Scope publicly announces the completion of each monitoring review on its website.

Scope completed the monitoring review for Reneszánsz Kőfaragó Zrt (B/Stable issuer rating; B+ rating on senior unsecured debt) on 16 December 2021.

This monitoring note does not constitute a credit rating action, nor does it indicate the likelihood that Scope will conduct a credit rating action in the short term. Information about the latest credit rating action connected with this monitoring note along with the associated rating history can be found on www.scoperatings.com.

Key rating factors

Reneszánsz Zrt. issued a HUF 2.4bn senior unsecured bond priced at 3.2% in April 2021. The bond strengthened the company’s liquidity position, which Scope assesses as adequate, with no debt maturities until 2024 (other than mine lease payments, which Scope considers debt-like). The 3.2% coupon rate provides for a comfortable interest cover of 3-4x.

The business risk profile continues to be supported by the company’s position as the largest limestone dimension stone producer in Hungary, with a robust order book, but constrained by the small absolute size of the business, high costumer concentration and below industry-average profitability. Turnover of HUF 2.1bn and an EBITDA margin of 16% in 2020 were in line with expectations, and Scope foresees an improvement on both metrics for the full year 2021.

The company’s free operating cash flow is expected to turn positive from 2022 after the latest round of capital investments is complete, which has suffered some delay due to later than planned issuance of the bond and supply chain constraints. This should allow Reneszánsz to gradually reduce its high financial leverage (Scope-adjusted debt/EBITDA), including the capitalisation of future mine concession payments, towards 6x in 2022 and 2023 (2020: 7.8x).

The methodology applicable for the reviewed ratings and/or rating Outlook (Corporate Rating Methodology, 6 July 2021) is available on https://www.scoperatings.com/#!methodology/list.
This monitoring note is issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0.
Lead analyst Tommy Träsk, Director

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