Global credit rating agency Moody’s Investors Service upgraded POSCO’s credit ratings (Baa2) outlook from negative to stable.
“POSCO’s ratings outlook was upgraded due to its improved financial soundness from regaining positive results and reducing debt,” remarked Joe Morrison, Vice President of Moody’s. “We anticipated that POSCO will sustain its stability for the next 12 to 18 months.”
Moody’s forecasted that POSCO’s operating profits this year before the upgrade will increase by approximately 25% year on year, and its overall debt will decrease by 14%. Furthermore, the net debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) ratio is expected to be approximately 3.8:1, which indicates a decline compared to last year’s 4.7:1. The times interest earned ratio of EBIT (earnings before interest and tax) is expected to amount to 4.1:1 this year, which is an improvement from 3.2:1 in 2015. Moody’s analyzed that this financial ratio meets the requirements for POSCO’s “Baa2” rating.
This upgrade of ratings was significantly affected by POSCO’s Q3 earning surprise, according to Moody’s. The fact that POSCO’s Q3 operating profit exceeded 1 trillion KRW, due to increased sales of World Premium (WP) products and prices of steel products, had a great influence on the ratings upgrade. The Q3 results show a 58% increase year on year.
Moody’s had previously issued a negative rating to POSCO’s credit ratings outlook in February due to decreased profitability caused by oversupply. POSCO has steadily committed to restructuring since the inauguration of POSCO CEO Ohjoon Kwon in 2014, and recovered the outlook to stable in less than a year.
Global credit ratings consist of credit information provided by specialized credit rating agencies for investors by fairly analyzing and evaluating the management conditions and financial structure of public institutions and private companies worldwide.