UzAuto Motors receives its first ever 'B+' rating from Fitch

Fitch Ratings has assigned Uzbekistan`s one and only car maker UzAuto Motors a Long-Term Issuer Default Rating of 'B+' with Stable Outlook. Fitch has applied its 'Government-Related Entities Rating' Criteria and assessed the linkage between UAM and its indirect sole shareholder, the Republic of Uzbekistan, to be moderate-to-strong. 

According to the report, Fitch views the status, ownership and control linkage of UAM with the state as 'Strong' because there is full state ownership and operational control by the parent over the company's capex and operational strategy.

“We assess the support track record as 'Strong' due to the established state support in the form of shareholder loans on favourable terms; the absence of large dividends paid to the parent, which we expect to continue at least until the end of the planned large capex programme; and the favourable regulatory environment supported by high import duties for cars, protecting the company's dominant position in its domestic market”, says the rating.

It assessed the financial implications of a UAM default as 'Moderate' and believes the company would have a moderate impact on the availability of financing for the government and other Government-Related Entities (GREs).

Fitch also assessed UAM 's Standalone Credit Profile at 'b'. This reflects the company's business profile, which is weaker than that of other Fitch-rated carmakers, with limited scale, narrow product range and sales concentrated in Uzbekistan.

The share of exports declined to about 5% over 2018-2020 but the company is aiming to increase this to about 16% by 2023 mainly through larger sales in Kazakhstan and Russia.

Fitch also observed a moderate impact of Covid-19. In contrast to other global carmakers, UAM's earnings were less affected by the pandemic in 2020. The company's sales volume in 2020 increased by 5% yoy although revenue deteriorated by single-digits in USD terms amid local currency devaluation.