3. WHAT IS A CREDIT
PROFILE?
• A credit profile is a document which provides information about a
person’s or a business entity’s credit history.
• Credit profiles are used by lenders and other agencies which offer
credit to determine creditworthiness.
• They are also utilized by prospective landlords and other people
who might have an interest in an entity’s credit history.
• A good credit profile will make it easier for someone to access
credit, and a bad credit profile can become a major stumbling
block.
4. WHAT DOES A CREDIT
PROFILE CONTAIN?
• The profile includes a complete history of the credit
accounts someone has open or has held in the past,
along with information about their limits, the balances
carried on them, and the person's payment history.
• The maximum ever carried on each account will be
listed, as will information about late or incomplete
payments. Old accounts are eventually dropped from a
credit profile after a set number of years, classically
seven.
• A credit profile also often includes information about
someone's employment history, along with listings of any
inquiries made about someone's credit.
5. • If, for example, someone takes out a loan to buy a
car, the inquiry from the lender will show up on his or
her credit profile, and another lender will be able to
see that an inquiry was made. The inquiry history
may be used to determine whether or not credit was
granted to someone, or to alert the person reviewing
the credit profile to the fact that a new credit account
may be in the process of being opened.
6. constituents
The credit profile is a picture of how you (as an individual or a
business entity) paid back the companies you have borrowed
money from, or how you have met other financial obligations.
There are usually five categories of information on a credit profile:
(a) What's In Your Credit Score
(b) Identifying Information
(c) Employment Information
(d) Credit Information
(e) Public Record Information
(f) Inquiries
7. WHO CAN HAVE A
CREDIT PROFILE?
• Credit profiles can be found for individuals and businesses.
• People who are just starting businesses should take steps to
create a separate business profile. This ensures that personal
credit black marks will not count against the business, and it
can generate access to business loans and other types of
accounts which are only open to businesses, not to individuals.
• Both business and personal profiles should be regularly
reviewed for errors, and if errors are identified, a request for
correction should be filed.
8. HOW TO BUILD A CREDIT
PROFILE?
• The best way to build up a credit profile is to keep current on all
credit accounts, making payments on time and in the amounts
required, or in excess of the minimum.
• It is also a good idea to avoid carrying a balance in excess of
50% of someone's available credit on a revolving
credit account, and to avoid opening two many revolving credit
accounts, as this can make someone look like a credit risk.
• Consumers should be aware that agencies which claim to “fix”
someone's credit are often highly questionable, as usually
activities which alter a credit profile can only be undertaken by
the person whom the profile concerns.
9. CONSTITUENTS OF A
CREDIT PROFILE
• There are generally five constituents of a credit profile of
a person or a business entity. These 5 categories are
listed below:
1. Payment History
2. Amounts Owed
3. Length of Credit History
4. New Credit
5. Types of Credit Used
11. Rating Migration
• Credit Rating Transition is the migration of a debt instrument from one rating to
another rating over a period of time.
• This migration is either an upgrade or a downgrade from an existing rating.
• This movement indicates the change in the credit quality of the instrument assessed
by the rating agency.
• Agencies such as S&P’s, Moody’s and Fitch assess the credit quality of all the debt
instrument in their portfolio and assign a rating to the credit quality. This rating
changes as and when new information is available about the obligor's financial
health.
13. overview
• The iron and steel sector was one of the hardest hit by the global crisis,
with a 24% fall in iron and steel consumption.
• In recent years, production of steel in Latin America grew an average
4.4% per year.
• Given the size and importance of iron and steel companies, governments
have always paid attention to this sector.
• Latin America’s appallingly inadequate infrastructure spending also
manifests in its per capita annual consumption of steel, a major raw
material for the infrastructure sector.
14. overview
• In Latin America, Brazil concentrates 51% of production of
steel, while Mexico produces 27%, followed by Argentina (8%)
and Venezuela (6%).
• Brazil is the main steel exporter in Latin America, ranking 13th
place worldwide. It is also the main world exporter of iron.
• FDI in iron and steel is also concentrated in Brazil and Mexico.
In Brazil it amounts to 28% of total FDI in manufacturing and in
Mexico 17%. FDI flows to this sector is explained by growing
demand, opportunities to buy companies being privatized,
lower production costs and the search for natural resources.
15. companies
• The major players in the iron and steel industry in
the region of Latin America are –
• Vale, the global mining behemoth;
• Gerdau SA, the world’s 14th largest and Latin
America’s largest steelmaker;
• Subsidiaries of ArcellorMittal in Latin America.
16. Vale SA
• Vale, with total iron ore reserves of about 14 billion metric tons,
is the largest iron ore producer in the world. A $150 billion
diversified mining company, it has the capacity to produce
about 400 million tons of iron ore a year and accounts for more
than 80% of Brazil’s total iron ore exports.
• Headquartered in Rio de Janeiro, Brazil, Vale is one of the
largest mining enterprises in the world, with substantive
positions in iron ore, nickel, copper, and coal, as well as
supplemental positions in energy production and positions in
steel production.
• Although the firm is a mining giant - with nickel, coal,
aluminum, copper and coal production as well as logistics units
- iron ore mining is its largest business and generates more
than 60% of its revenues.
• For the twelve months through December 31, 2013, Vale had
net operating revenues of $46.8 billion.
18. • In April 2014, Moody's Credit Rating Agency changed the
rating outlook for Vale S.A. (Vale) to positive from stable.
• The change in outlook to positive from stable acknowledges
Vale's more focused and disciplined approach to project
development, capital allocation, resizing of its asset portfolio to
strategically important business segments, divestiture of such
non strategic assets, and focus on cost reduction.
• This is exemplified by the company's reduction in research and
development costs in 2013 by approximately 45% to around
$663 million, reduction in capital expenditures by about $2
billion to around $14.2 billion, and overall reduction in
production and general costs, although some benefit in these
last areas was derived from favorable currency movements,
which might not be sustainable.
19. • Vale's Baa2 global local currency rating reflects the
company's diversified product base, strong coverage
ratios, and competitive cost position.
• However, the rating considers the challenges that will
continue to impact the company's operating cost profile,
particularly for labor as well as increasing royalties.
• The rating also incorporates the volatility in iron ore and
metal prices (copper and nickel) as well as metallurgical
coal and fertilizers, and Vale's earnings and cash flow
sensitivity to movement in these prices of its key
minerals, particularly iron ore given the dominance of this
segment in the overall performance of the company.
20. • Vale's rating could be favorably impacted should the
company maintain or reduce absolute debt levels
over the next 15 months, successfully complete its
major capital expansion projects without significant
cost overruns, maintain operating cash flow minus
dividends to debt of at least 30%, and free cash flow
to debt in the 10% range, at a minimum.
• Further considerations would include greater clarity
with the company's acquisition strategy and financial
policies. A further consideration would be the
Brazilian Governments foreign currency bond rating.
21. Gerdau S.A.
• Gerdau SA is a Brazil-based holding company engaged
in the manufacture and sale of steel products. The
Company produces long steel and flat steel items,
principally through the process of fabrication in electrical
furnaces from scrap metal and purchased pig iron, as
well as by manufacturing steel from iron ore in the blast
furnace and by direct reduction.
• Gerdau is the world’s 14th largest steelmaker and the
largest producer of long steel in the Americas. It has 337
industrial and commercial units and more than 45,000
employees across 14 countries.
• Gerdau's core business is to transform steel scrap and
iron ore into steel products.
22. • Gerdau is a leading producer of long steel in the
Americas and one of the largest suppliers of special steel
in the world.
• It is the largest recycler in Latin America and around the
world it transforms, each year, millions of metric tons of
scrap into steel, reinforcing its commitment to sustainable
development in the regions where it operates.
• With more than 140,000 shareholders, the Company is
listed on the stock exchanges of São Paulo, New York
and Madrid.
23. Credit rating
• Despite a weak scenario for the global steel industry,
Gerdau S.A. has maintained adequate cash flow
generation.
• Reuters provided 'BBB-' global scale and 'brAAA' national
scale ratings on Gerdau.
• The ratings on Gerdau reflect the assessment of the
company's "satisfactory" business risk profile and
"intermediate" financial risk profile. The supporting
factors are Gerdau's adequate geographic diversification
throughout the Americas, the company's still-favorable
cost position in Brazil, its efficient operations overall, and
its "strong" liquidity.
24. • Offsetting these rating strengths are Gerdau's
exposure to the cyclical, commodity-oriented, long-steel
industry; the fierce competition from imports;
and the potentially challenging market conditions in
the next 12 months to 18 months.
• Gerdau holds a strong market position in Brazil and
benefits from geographic and product diversification
in the steel industry in the Americas.
• The company has expanded in specialty steel
markets globally. This segment accounted for about
25% of Gerdau's consolidated EBITDA in the last 12
months.
25. • The recent decline in raw material prices (especially iron ore
and metallurgical coal for the company's Ouro Branco mill and
scrap for its mini-mills in Brazil and in the U.S.), as well as
cheaper energy costs (gas in the U.S. and lower taxes on
energy purchases in Brazil) should help offset the competitive
pressures and result in some margin improvement through
2013.
• Still, there's believe that import competition in Brazil will likely
remain a continuous threat to Gerdau, either active or latent,
keeping margins down through the period even under a
relatively weaker currency. In North America, demand is
improving with positive growth in the nonresidential segments,
but it remains volatile because of uncertain market conditions.
• The stable outlook reflects Reuter’s opinion that Gerdau will
sustain its debt reduction trend during the next two to three
years--even if margins remain depressed during the next 12
months to 18 months.
26. Conclusion
• Looking at the credit rating for two of the largest iron and steel
producing companies in Latin America, we can observe the
rising trend in the market.
• The countries in Latin America are developing at a very fast
rate, which requires huge expenditure on infrastructural
projects. Infrastructure can not be made without the use of iron
and steel. Thus, matching the demand and supply in itself
linked to the credit rating of these iron and steel companies in
Latin America.
• Apart from use of their products in their domicile countries,
these companies also export iron and steel, due to rich
reserves.
• These are just a few points which influence the credit rating
agency's calculations. Giving BBB- and BBB+ rating to these
companies reflect strong credit rating for any company at this
global level.