(The following statement was released by the rating agency) MONTERREY, September 24 (Fitch) Fitch Ratings has affirmed the following ratings of SANLUIS Rassini, S.A. de C.V. (SLR): --Foreign currency Issuer Default Rating (IDR) at 'B'; --Local currency IDR at 'B'. The Rating Outlook is Stable. SLR's ratings reflect its solid business position in the auto industry as an essential supplier of suspension and brake parts, especially in North America. The ratings further reflect the geographic diversification of the company's operations, its long-term contracts, flexible cost structure, improving EBITDA margins, lower leverage and consistent positive free cash flow. SLR's ratings are limited by the cyclicality of the industry, NAFTA operations and customer concentration, exposure to exchange rate volatility and important debt maturities occurring in the fourth quarter of 2014. Solid Business Position Supports the Ratings SLR, a subsidiary of SANLUIS Corporacion, S.A.B. de C.V. (SLC), manufactures suspension and brake system components for light and heavy vehicles, with a leading position in North America and Brazil. The company's main product line, leaf springs, which accounted for approximately 68% of total sales in 2012, has historically had a market share of over 90% in North America and an estimated share in Brazil of 65%. This strong position results from the group's technology development over the years, close and long relationships with customers through product design and development, geographic location, and integrated operations. These factors have allowed the company to deliver high service levels and renew or gain new contracts with customers in the region. SLR is considered as an essential supplier, among others, for GM, Chrysler and Ford. However, SLR's customer base is concentrated; Detroit's three OEMs represent approximately 68% of total revenues. In 2012, North America represented 73% of total SLC revenues and 79% of its consolidated EBITDA. Fitch expects these values to remain relatively stable in the next few years. Production volumes of light vehicles in North America are expected to be in the range of 15.9-16.2 million units by the end of 2014, a 3.9% increase or 5.9% above 2012 volume, while in Brazil, commercial vehicle production volumes are expected to increase approximately 16.8% by the end of 2014. Low Cost Structure Provides Flexibility During the latest industry downturn, SLR's reorganization process was similar to other auto parts suppliers' initiatives. The company rationalized its installed capacity and headcount, allowing it to reduce its operational breakeven point from historical levels. Currently management believes the company has a lean structure and available capacity to absorb additional volumes. SLR's contracts usually are granted for the life of the platform, with an average of six years. Suspension and brakes customers' contracts provide raw material pass-through to prices (in either direction) and management has implemented strict cost and expenses controls in order to maintain plant efficiency and productivity. These actions, in conjunction with volume recovery from industry dynamics, have resulted in EBITDA margins between 12%-13% during 2012 and the first half of 2013. However, the company's business nature is closely dependent on volumes and industry cyclicality. Leverage Reduction in the Past Three Years SLR has been reducing its leverage level during the last three years as a result of higher EBITDA generation and debt reduction. As of June 30, 2013, SLC's total consolidated debt was USD250.3 million, distributed as follows: USD106 million of bank loans at the North American suspension group, USD41 million at the Brake Division, USD10.6 million at the Brazilian operations; USD7.7 million of outstanding balances of Euro commercial paper and Eurobonds at the SLC level, USD70.4 million of SLC notes due 2017, and USD14.6 million of SANLUIS Co-Inter (SISA) notes due 2020. On a consolidated basis, SLC's total debt-to-EBITDA ratio as of the last 12 months ended June 30, 2013 was 2.7x and its net debt-to-EBITDA ratio was 2.1x. The company intends to increase its debt maturity profile and move towards its long-term leverage target of 2.0x. Corporate and Debt Structure According to Fitch's criteria and methodology, debt at holding or sub-holding companies is structurally subordinated to debt at operating subsidiaries. SLR owns 100% of North America Suspension and Brake operations, and 50.1% of the Brazilian Suspension Group which funds its operations individually; the company only receives dividends from the Brazilian joint venture. In addition, current and/or future debt held at SLC or SISA (SISA notes due 2020) is subordinated to SLR's obligations, which would likely translate into lower ratings for those instruments. In Fitch's view, the company's history of debt restructurings and its corporate structure further limit the ratings. Rating Sensitivities Negative rating actions could result from a combination of lower volume sales and profitability as a result of lower demand in the North American light vehicle segment and Brazilian commercial vehicles division, and/or the loss of customers which in turn translates into increased leverage above expected levels. Conversely, positive rating actions could be taken if the company successfully reduces or refinances the outstanding debt balance of the North American suspension division, maintains constant leverage levels below 2.5x in conjunction with a strong liquidity profile and positive free cash flow generation. Contact: Primary Analyst Alberto de los Santos Associate Director +52-81-8399-9100 Fitch Mexico, S.A. de C.V. Prol. Alfonso Reyes 2612 Monterrey, N.L., Mexico Secondary Analyst Velia Valdes Analyst +52 81-8399-9100 Committee Chairperson Alberto Moreno Senior Director +52 81-8399-9100 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: [email protected]. Additional information is available at 'www.fitchratings.com'. Applicable Criteria and Related Research: --'Corporate Rating Methodology, including Short-Term Ratings and Parent and Subsidiary Linkage', Aug.5, 2013. 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=803044 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.