Fitch downgrades steel manufacturer InfraBuild to ‘CC’ amid audit delays

Fitch Ratings downgraded Australian steel manufacturer InfraBuild's Long-Term Issuer Default Rating to ‘CC' from ‘CCC-‘ on Monday, citing an elevated probability of default on its USD $550 million notes within the next three months.

The ratings agency pointed to InfraBuild's failure to publish audited financial statements for FY24, which were initially due in October 2024 but have faced multiple deferrals. The company is Australia's only vertically integrated manufacturer of long steel products, with electric arc furnace steelmaking capacity of 1.4 million tonnes annually.

Manufacturing operations at InfraBuild face additional headwinds from weak earnings performance, with first-half FY25 EBITDA dropping 43 per cent year-on-year. Fitch forecasts continued pressure on the company's manufacturing margins, particularly due to potential increases in steel imports as redirected flows from North Asia enter Australia.

Unlike the US, which imposed a 25 per cent steel import tariff from March 2025, and the EU's planned import quota reductions, Australia has not implemented new protectionist measures beyond existing anti-dumping duties.

The company's steel manufacturing operations could face further challenges, including potential price increases for steel billets from the recently-administrated Whyalla Steelworks, which traditionally supplies InfraBuild with approximately 400,000 tonnes annually.

Fitch noted that while this supply disruption could impact operations, the annual EBITDA effect would likely be less than AUD20 million, as InfraBuild has the option to import alternative materials.

InfraBuild's reported unrestricted cash of AUD288 million as of December 2024 is insufficient to address potential payment acceleration of its notes, valued at approximately AUD $880 million, if bondholders refuse further audit deadline extensions beyond March 31.

The company is pursuing asset sales and refinancing options, but Fitch believes these conditions are difficult to meet in a timely manner given the manufacturing sector's current challenges.

Picture: credit InfraBuild