...Weak Industry Constrains Ratings: Excess capacity and volatile raw material costs have kept profit margins thin at China Oriental Group Company Limited (COG) since 2011. However, Fitch Ratings believes a sustained earnings recovery by 2016 may emerge amid plans by Chinese steel producers to trim capex, and as a significant increase in iron ore supply reduces raw material costs. COG remains profitable despite the downturn in the Chinese steel sector, with an EBITDAR margin of 6.7% in 2014, up from 3.9% in 2013. Limited Business Profile Improvement: COG has not significantly widened its product offerings since 2010. It started making rebar products, commonly used by the construction industry as concrete reinforcement, in 2011, and sheet pile in 2014, a high value-added product used to make steel walls; however, the latter is unlikely to become a major earnings contributor soon. The sustained market weakness has narrowed COG's options in pursuing more product diversification, and has forced...
