RAM Ratings assigns AA3/Stable/P1 corporate ratings to SK Nexilis and its subsidiary, debutants in the sukuk market

RAM Ratings has assigned corporate credit ratings of AA3/Stable/P1 to SK Nexilis Co Ltd (SK Nexilis or the Group) and its wholly owned subsidiary, SK Nexilis Malaysia Sdn Bhd (SKNXM or the Company). We have also assigned an AA3/Stable rating to SKNXM's proposed RM2.0 bil ASEAN Green SRI Islamic Medium-Term Notes Programme (proposed ASEAN Green SRI Sukuk  akalah).

SK Nexilis is a wholly-owned subsidiary of SKC Co Ltd, which in turn is 40% owned by its ultimate shareholder, SK Inc. The latter is the second largest chaebol in South Korea, with a solid credit standing, while SKC is a key player in the country's chemicals sector with a fairly diversified business profile.

SK Nexilis' stand-alone risk profile reflects its respectable position as one of the top 10 copper foil manufacturers globally, with an estimated market share of 13%-15% based on capacity in the past few years. Its technology is leading-edge, backed by the ability to produce the thinnest, widest and longest copper foil, giving the Group an advantage over peers. SK Nexilis has diverse end markets while its production base is spread out over South Korea and Malaysia and will soon extend to Poland. The Group is largely shielded from fluctuations in copper prices due to the industry practice of quoting product prices at copper prices plus a processing fee, although periods of significant price volatility may affect the efficacy of this cost pass-through arrangement. SK Nexilis is also expected to benefit from the ramp-up of its Malaysian plants when they are fully and successfully commissioned given the better cost efficiency vis-?-vis its existing South Korean plants.

SK Nexilis' geared balance sheet, its capital-intensive business and aggressive expansion however, moderate its stand-alone ratings. Total debts soared to KRW1.13 tril as at end-December 2023 (end-December 2020: KRW2