NICE Investors Service Downgrades Dongwha Enterprise's Long-Term Credit Rating to 'BBB+'

On March 10, NICE Investors Service downgraded the long-term credit rating of Dongwha Enterprise from 'A- (Negative)' to 'BBB+ (Stable)'. The short-term credit rating was newly assigned as 'A3+'.

According to NICE Investors Service, this downgrade reflects the significant increase in financial burden due to weakened profit generation, which has resulted from unfavorable industry conditions and business restructuring.

First, NICE Investors Service pointed out, "With continued weak demand amid a downturn in the domestic housing and construction markets and slowed growth in the global electric vehicle market, the company's sales volume has declined due to the sale of overseas subsidiaries and the closure of outdated factories." However, it is expected that the negative impact on sales will be partly offset by the consolidation of the MDF manufacturing subsidiary in Malaysia at the end of last year and the signing of electrolyte supply contracts.

For the chemical division, NICE Investors Service anticipated that "short-term profitability improvement will be limited, due to continued operating losses, raw material price volatility, and the initial operating costs of the Tennessee plant in the United States."

Excessive investments have also expanded the financial burden, negatively impacting the long-term credit rating. NICE Investors Service explained, "Since 2019, large-scale facility investments have continued in production plants in Vietnam and the United States for business expansion. However, as profitability has weakened since 2023 due to unfavorable market conditions in downstream industries, the burden of borrowings has increased significantly."

The agency added, "Although overseas capital expenditures have largely settled, borrowings have continued to rise in 2025 due to ongoing support for affiliated companies. Considering the scale of investment plans, increased borrowings, and current level of profit generation, the possibility of easing borrowing pressure in the short term appears limited."

Furthermore, as of the end of September last year, Dongwha Enterprise continued to face financial support burdens for affiliates, including providing payment guarantees amounting to approximately 163.2 billion won for its parent company DWI and M Park. This was also cited as a reason for the downgrade.

NICE Investors Service explained, "As of the cumulative third quarter of 2025, the EBITDA-to-sales ratio was 6.2%, and the total borrowings-to-EBITDA ratio was 19.6 times, thus meeting the criteria for a downgrade review in terms of quantitative indicators."

This content was produced with the assistance of AI translation services.