Xinhua Far East China Ratings has downgraded the outlook for Shenzhen SEG Samsung Glass Co Ltd from positive to negative because of the quicker-than-expected deterioration of the cathode ray tube (CRT…
Xinhua Far East China Ratings has downgraded the outlook for Shenzhen SEG Samsung Glass Co Ltd from positive to negative because of the quicker-than-expected deterioration of the cathode ray tube (CRT) market. Xinhua Far East China Ratings said in a statement that Shenzhen SEG Samsung, which designs, produces and distributes CRT glass bulbs, retains its “BB+” rating. The statement said that the decline in the cathode ray tube market has already surpassed the company“s improvement in corporate governance in its overall credit risk profile. It noted that SEG Samsung reported in the week commencing 24 October 2005 that its net profit for the year is expected to fall by 50% year-on-year. The ratings agency sees continued erosion of SEG Samsung“s profitability as plasma and LCD TV overtake conventional CRT TV. “Xinhua Far East is concerned that given the evolution trend in color TV, it would be very hard for SEG Samsung to turn around its profitability in 2006,” the statement said. The ratings agency noted that from January to July 2005, 462,000 LCD TV sets were sold in China, up 587.6% year-on-year. A total of 239,000 plasma TV sets were also sold during the period, up 195.7% year-on-year. In contrast, the sales volume and turnover of CRT TV sets declined by 9.33% and 13.21% respectively year-on-year. Xinhua Far East said that there is already overcapacity in the CRT glass bulb industry and it expects this problem to persist as demand shrinks. “SEG Samsung has already exhibited idle capacity and piling inventories as a result,” it said. The “BB+” long-term issuer credit rating reflects the company“s current position as the leading independent CRT glass bulb producer and its close business ties with related Samsung Electronics“ downstream companies in China. Going forward, SEG Samsung“s credit rating will depend mainly on whether it can expand its share of a generally declining market and whether it can get strong market and financial support from its shareholder, Xinhua Far East said. SEG Samsung is in the Xinhua FTSE China 200 Index.