OREANDA-NEWS. Fitch Ratings-London/Moscow-02 July 2014: Fitch Ratings has affirmed JSC Acron's (Acron) Long-term foreign and local currency Issuer Default Ratings (IDR) at 'B+'. The Outlook on the Long-term IDRs has been revised to Positive from Stable.

The Positive Outlook reflects Fitch's view that Acron's operational profile has fundamentally improved as a result of the ramp up of the Oleniy Ruchey phosphate mine to levels sufficient to cover the group's internal needs. Acron's lack of vertical integration and full reliance on monopolistic producer OAO Apatit had been a key constraint on the rating.

The Positive Outlook also reflects our opinion that Acron's credit metrics will improve in the next two years as a result of the material reduction in its potash plan. This contrasts with previous assumptions that net leverage would be sustained at around 3.0x due to the group's investment programme. Our base case now assumes a moderate but gradual improvement in pricing conditions from current challenging levels and Fitch project 2016 funds from operations (FFO) net adjusted leverage (leverage) below the 2.5x positive rating guideline Fitch had previously set.

The open-pit mine at Oleniy Ruchey continues to ramp up to full production with 900mtpa expected by end-2014. The mine was commissioned in 1H12 and is meeting Acron's internal phosphate needs in 2014. The group's production requires 700ktpa. This is a critical and credit enhancing step for Acron who had previously depended on monopolistic supplier OAO Apatit for its phosphate concentrate.

RATING SENSITIVITIES
Positive: Future developments that could lead to positive rating action include:
- Evidence of moderation in capex and shareholder distributions resulting in leverage maintained below 2.5x on a sustained basis could lead to an upgrade.

The current rating Outlook is Positive. Consequently, Fitch's sensitivity analysis does not currently anticipate developments with a material likelihood, individually or collectively, of leading to a downgrade. However, future developments that may, individually or collectively, lead to a stabilisation of the Outlook or to a downgrade include:
- Aggressive capex or shareholder distributions resulting in leverage above 3.0x
- Sustained materially negative FCF (excluding funding of the potash project)
- A sharp deterioration of market conditions or Acron's cost position with a sustained drop in EBITDAR margin below 20%.