Fitch assigns Central Asia's United Cement Group First-Time 'B+' IDR

By Muzaffar Ismailov in Tashkent June 4, 2023

Fitch Ratings has assigned Cyprus-based Central Asia’s largest group of cement producers United Cement Group (UCG) a first-time Long-Term Issuer Default Rating (IDR) of 'B+' with a Positive Outlook.

“The rating reflects UCG's strong leverage profile, sound profitability and a moderate business profile underpinned by its leading position in Uzbekistan's cement market. The rating is mainly constrained by high concentration of production capacity and sales in Uzbekistan, a weak operating environment and limited product diversification. Execution risk is exacerbated by its limited operational record in the current asset base, which is partly offset by strong end-markets outlook and cost-cutting initiatives,” the ratings agency said.

UCG is the largest cement producer on the Uzbek market with a share of around 40%, while Kyrgyzstan accounted for around 15% of group revenue in 2023. Following the acquisition of Kyzylkum, the country’s largest cement plant from the state in mid-2022, the group's total production capacity reached around 9.5 MTPA.

Fitch noted that Kyzylkum plant would contribute around 60% of the group's Ebitda in 2023. Bekabadcement plant, returned by the state in 2020 after its seizure in 2010, is expected to account for a further 15% of Ebitda. Execution risk is partially mitigated by a solid medium-term construction outlook in Uzbekistan and ongoing extensive cost-cutting initiatives at Kyzylkum.

Medium-term cement consumption in Uzbekistan is to be mainly supported by a solid pipeline of infrastructure and housing projects. “The group's capacity utilisation will be also supported by its leading market position and key plants' favourable locations in the Centre and Tashkent regions, which have a record of above-average capacity utilisation, especially compared with smaller plants located in Fergana Valley,” Fitch noted.

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