(The following statement was released by the rating agency) LONDON/ISTANBUL, August 23 (Fitch) Fitch Ratings has affirmed Habas Sinai ve Tibbi Gazlar Istihsal Endustrisi A.S.'s (Habas) Long-term foreign currency and local currency Issuer Default Ratings (IDR) at 'B+'. Fitch has also upgraded the company's National Long-term rating to 'A(tur)' from 'A-(tur)' due to the recalibration of the rating scale. The Outlooks on all ratings are Stable. KEY RATING DRIVERS Diversified Operations: Habas has a diversified business profile with meaningful operations in steel production, industrial gases, and merchant power generation. Fitch recognises the company's near monopoly position in the domestic Turkish industrial gases market. Whilst the steel division is by far the largest in terms of revenue generation, the industrial gases and energy segments have historically generated higher and more stable EBIT. Rating Constraints: Rating constraints include the company's lower profit margins compared to other rated steel companies in the 'B' rating category, limited global scale and weaker information disclosure and transparency levels. The lower EBIT margin of Habas's steel business is partly due to the company's use of Electric Arc Furnaces (EAF), which are in general lower margin compared to the blast furnace route. The lower margins are also due to the high proportion of commodity steel products (billets) within the company's product mix. Conservative Financial Profile: FY2012 results continued the positive trend in place since 2010 with an 11% increase in revenues to TRY3.9bn and a 15% increase in EBITDAR to TRY165m. As of May 2013 the company had total debt of TRY417m (USD538m) of which short-term debt was TRY147m, versus cash of TRY755m. For 2013 and beyond, Fitch expects no change in Habas's conservative financial policies. RATING SENSITIVITIES Positive: Future developments that may, individually or collectively, lead to a positive rating action include: - An improvement in disclosure and transparency levels together with a strengthening of the company's operational profile resulting in improved scale, diversification and profit margins. Negative: Future developments that may, individually or collectively, lead to a negative rating action include: - Negative rating pressure could result from funds from operations gross leverage in excess of 4.0x, a consolidated EBITDAR margin below 4.0%, or a liquidity score below 1x. Contact: Principal Analyst Cigdem Cerit Associate Director +90 212 279 1065 Supervisory Analyst Peter Archbold Senior Director 30 North Colonnade London E14 5GN +44 20 3530 1172 Committee Chairperson Alex Griffiths Senior Director + 44 20 3530 1033 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: [email protected]. Additional information is available on www.fitchratings.com. For regulatory purposes in various jurisdictions, the supervisory analyst named above is deemed to be the primary analyst for this issuer; the principal analyst is deemed to be the secondary. Applicable criteria: 'Corporate Rating Methodology' dated August 2012 is available at www.fitchratings.com. Applicable Criteria and Related Research: Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715139 Additional Disclosure Solicitation Status http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=800283 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.