08-07-2025
Thai corporates' high leverage a concern
Several major Thai corporate borrowers have high leverage relative to their Asia-Pacific peers following a long period of large debt-funded investments and weak growth, according to Fitch Ratings.
The average ratio of net debt to Ebitda (earnings before interest, tax, depreciation and amortisation) for Thailand's 10 largest bond issuers was 3.8 times at the end of 2024, according to Obboon Thirachit, senior director for corporate ratings at Fitch Ratings (Thailand).
That rate was much higher than 2.1 times for all Fitch-rated Thai corporates and 2.4 times for Asia-Pacific peers, Mr Obboon told the recent Thailand Corporate Credit Outlook event in Bangkok.
While PTT Group had the lowest leverage of 1.6 times, the other largest issuers had leverage ratios ranging from 3.8 to 15 times, he said. Any ratio greater than 3 is considered worthy of close monitoring.
Prolonged high leverage and consistent negative free cash flow mean companies are more reliant on debt funding than on cash flows derived from operations, according to Fitch. This could result in a vulnerable capital structure that faces higher refinancing and liquidity risks, particularly during periods of market volatility.
Weak corporate governance, such as inadequate board oversight, opaque group structures and poor disclosure, are other red flags of financial deterioration, noted Fitch.
Resilient sectors, such as telecoms, should continue to benefit from less competition. Infrastructure development should also support earnings growth in the cement and building materials sector, said the ratings firm.
The earnings of packaging companies should remain strong, supported by robust demand. However, petrochemical companies continue to face earnings pressure due to a prolonged downturn caused by weak demand and increased supply.
Power companies are increasing investments and acquisitions as they seek to transition to renewable energy sources, which could worsen their already-high financial leverage.
Fitch expects earnings for oil and gas companies to moderate from a high base alongside an expected softening in oil and gas prices, although earnings should remain robust.
