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Hankook Tire wins 1st ratings from S&P, Moody's

Hankook Tire Co. has obtained its first ratings from two of the world's three major credit ratings agencies due to its solid profitability, the company said Wednesday.

Moody's Investors Service has assigned a first-time Baa2 rating to the country's biggest tiremaker by sales, with a stable outlook, the ratings firm said in a statement.

"Hankook Tire's Baa2 rating primarily reflects its high operating efficiency, as evidenced by its robust profitability, low financial leverage, as well as its leadership position in the domestic tire market," Yoo Wan-hee, a Moody's vice president and senior credit officer, said in the statement. 


The tiremaker's average adjusted EBITA margin of 15.5 percent between 2014 and 2016 is one of the highest among global tiremakers, and reflected the operating leverage stemming from its large-scale production bases in Korea, China, Hungary and Indonesia, it said.

Hankook Tire produced a total of 99 million tires at seven plants in the four countries last year.

EBITA stands for earnings before interest, taxation, deprecation, and amortization. It measures a company's full profitability before reducing it by interest, taxes and amortization.

However, the rating is "constrained" by Hankook Tire's moderate scale and limited diversity in product mix relative to global top-tier industry peers such as Bridgestone Corp. (A2 stable), Compagnie Gener. des Etablissements Michelin (A3 stable) and Continental AG (Baa1 stable), the statement said.

Standard & Poor's has also assigned its first-time BBB rating with a stable outlook to the world's No. 7 tiremaker by sales.

"We expect Hankook's profitability to remain higher than the industry average over the next 12-24 months. We also anticipate that the Korea-based tiremaker's steady operating cash flow will cover its investment needs, leading to gradually declining debt," S&P said in a statement.

It also pointed out Hankook's lack of scale relative to the top-tier rivals as weakness.

In the January-June period, Hankook Tire posted 3.306 trillion won in sales, down 1.4 percent from 3.353 trillion won a year earlier. The sales decline was affected by lower demand from its captive buyer Hyundai Motor Group, the company said.

Fitch Ratings Inc. has yet to assign a rating to the Korean tiremaker. (Yonhap)