Fitch Ratings has downgraded Japan based Nippon Steel & Sumitomo Metal Corporation's Long Term Foreign and Local Currency Issuer Default Ratings and senior unsecured rating to 'BBB' from 'BBB+'. A Negative Outlook has been assigned. The agency has also downgraded NSSMC's Short-Term Foreign and Local Currency IDRs to 'F3' from 'F2'.
The downgrade reflects NSSMC's weakened financial profile amid a global steel industry downturn. Leverage has increased significantly as a result of lower profitability stemming from weak demand and prices, after adjusting for the adverse impact on leverage from the merger between Nippon Steel and Sumitomo Metal on October 1st 2012. The increase in leverage from the merger is, by itself, neutral on ratings due to offsetting impact from an improved business profile and potential synergies of the merged entity.
