New York, May 05, 2022 -- Moody's Investors Service ("Moody's") has completed a periodic review of the ratings -and other ratings that are associated with the same analytical units for the rated entity(entities) listed below.
The review was conducted through a portfolio review discussion held on 28 April 2022 in which Moody's reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. A possible outcome from periodic reviews is a referral of a rating to a rating committee.
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This publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future. Credit ratings and outlook/review status cannot be changed in a portfolio review and hence are not impacted by this announcement.
Key Rating Considerations
The principal methodology used for these rated entities was Building Materials published in September 2021. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Building Materials
Scale: Scale is an indicator of a company's revenue-generating capability and its resilience to shocks, such as sudden shifts in demand or rapid cost increases. Large-scale companies generally have more flexibility to allocate capacity and absorb expenses under different demand and cost scenarios than small-scale companies, a consideration in the highly cyclical building materials industry. Total revenue is an indicator of scale.
Business Profile: The business profile of a building materials company influences its ability to generate sustainable earnings and operating cash flows. Core aspects of a building materials company's business profile include its geographic diversity, market position, product diversity, barriers to entry, degree of vertical integration and exposure to carbon regulation.
Profitability and Efficiency: Profits are considered because they are needed to generate sustainable cash flow and maintain a competitive position. A company's ability to manage its overall costs and maintain operating margins provides an indication of its ability to maintain its operations through economic downturns while continuing to pay its debt service. Some indicators of profitability and efficiency include Operating Margin, Operating Margin Stability, and EBIT/Average Assets.
Leverage and Coverage: Leverage and cash flow coverage measures provide indications of a company's financial flexibility and long-term viability. These metrics can also provide insight into management's philosophy regarding the company's capital structure and how much financial risk it is willing to undertake. Measures of leverage and coverage include Debt/Book Capitalization, Debt/EBITDA, EBIT/Interest Expense, and Retained Cash Flow/Net Debt.
Financial Policy: Financial policy encompasses management and board tolerance for financial risk and commitment to a strong credit profile is considered. Financial policy directly affects debt levels, credit quality, the future direction for the company and the risk of adverse changes in financing and capital structure. Financial risk tolerance serves as a guidepost to investment and capital allocation. The issuer's desired capital structure or targeted credit profile, its history of prior actions, including its track record of risk and liquidity management, and its adherence to its commitments are considered.
Other Considerations: Some other considerations may include financial controls and the quality of financial reporting; corporate legal structure; the quality and experience of management; assessments of corporate governance as well as environmental and social considerations; exposure to uncertain licensing regimes; and possible government interference in some countries. Regulatory, litigation, liquidity, technology, and reputational risk as well as changes to consumer and business spending patterns, competitor strategies and macroeconomic trends. Increasing environmental requirements and efforts to reduce greenhouse gas emissions (known as carbon transition risk) may lead to higher costs for building materials companies, especially cement producers. Stricter air pollution standards could also increase costs. Inability to pass compliance costs on to customers could erode profitability and cash flow generation. Disparities in regulations and associated costs are likely to favor some companies and create competitive challenges for others.
• Anhui Conch Cement Company Limited
• Beijing New Building Materials Public Ltd Co
• Boral Limited
• Huaxin Cement Co., Ltd.
• Pujiang International Group Limited
• UltraTech Cement Limited
• West China Cement Limited
The principal methodology used for these rated entities was Environmental Services and Waste Management Companies published in April 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Environmental Services and Waste Management Companies
Business Profile: Business profile is considered in assessing credit quality for companies in the environmental services and waste management industry. Entry into this industry often requires significant investment, such as costs associated with developing landfill sites or building response capabilities for environmental clean-up projects. Large enterprises with more geographically diverse operations are better positioned to fund these investments and to achieve an adequate return on the investment. Moreover, companies with a more robust business profile, characterized by strong presence across multiple markets or geographies, are better able to weather the business cycle or other operating risks affecting the sector. Considerations may include market position, range of operating businesses, barriers to entry and the level of waste internalization for waste management companies.
Scale: Larger scale can be an indicator of a company's ability to influence business trends and pricing within the industry and to support a stable or growing market position. Scale also can be an indicator of greater resilience to changes in product demand, geographic diversity, cost absorption, R&D capabilities and bargaining strength with customers and suppliers. Total reported revenue is an indicator for scale.
Profitability and Efficiency: Profitability is one measure of success of the business and effectiveness of management. A company needs to sustain adequate margins in order to make the ongoing investments in research and development that are needed to maintain a technological edge. The EBIT margin is an indicator of profitability and efficiency.
Leverage and Coverage: Leverage and coverage measures are indicators of a company's financial flexibility and long-term viability. Coverage is critical to any company's ability to repay its indebtedness and provide financial returns to shareholders. Leverage demonstrates the overall level of debt employed in the capital structure relative to cash-based earnings and the level of financial risk which management is willing to employ in the company. Among others, ratios such as Debt/ EBITDA, EBIT/ Interest Expense, and Funds from Operations/ Debt are indicators of leverage and coverage.
Financial Policy: Management and board tolerance for financial risk is considered as it directly affects debt levels, credit quality, and the risk of adverse changes in financing and capital structure. Our assessment of financial policies includes the perceived tolerance of a company's governing board and management for financial risk and the future direction for the company's capital structure. Considerations include a company's public commitments in this area, its track record for adhering to commitments, and our views on the ability of the company to achieve its targets.
Other Factors: Other factors may include, but are not limited to, the quality of management, corporate governance, financial controls, liquidity management, environmental and legal risks, labor relations, event risk and seasonality.
• Recycle and Resource Operations Pty Limited
The principal methodology used for these rated entities was Government-Related Issuers Methodology published in February 2020. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Government-Related Issuers Methodology
Assigning a Baseline Credit Assessment (BCA): The majority of Government-Related Issuers (GRIs) begin with an assessment of the GRI's standalone strength (i.e. BCA) – its ability to service and repay outstanding debt without recourse to extraordinary support from the supporting government - using the published sector-specific methodology that is most suitable for the predominant activities of the GRI. Our assessment of standalone strength includes any day-to-day support received from the government that can be clearly distinguished from extraordinary support. Support mechanisms, such as an obligation of the government to ensure the GRI's solvency and liquidity, are reflected in the BCA when they are legally or contractually documented.
Government uplift: The GRI's ratings include any uplift due to systemic support and typically focus on three structural factors and three factors explaining the level of the government's willingness to provide support. Structural factors address the legal and quasi-legal aspects of the government's relationship with the GRI and include: (1) guarantees, (2) ownership level and (3) barriers to support. The factors underlying willingness consider the softer connections between the two entities and include (4) the likelihood of government intervention, (5) political linkages and (6) economic importance. Support is determined using a joint default analysis framework which considers an estimate of the likelihood of extraordinary support, an assessment of the credit quality of the supporting government, and default correlation between the two entities.
GRIs without a BCA: In limited instances, it is not possible or meaningful to assign a BCA. The GRI is so inextricably linked to the government that a meaningful standalone BCA cannot be derived. In such cases, a top-down analytical approach is used that chiefly considers the ability and willingness of the government to provide timely support, instead of the usual bottom-up approach of starting with the BCA and then considering uplift towards the government's rating.
• Shanghai Electric (Group) Corporation
The principal methodology used for these rated entities was Manufacturing published in September 2021. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Manufacturing
Scale: Scale is a consideration because it is an indicator of the overall depth of a company's business and its success in attracting a variety of customers, as well as its resilience to shocks, such as sudden shifts in demand or rapid cost increases. Larger manufacturing companies typically attract a greater breadth of customers and can better withstand cyclicality resulting from economic conditions and product cycles. A larger revenue base also generally leads to important economies of scale in raw material purchases and corporate functions, particularly important given the need for global supply chain management to control costs for most manufacturing companies. Larger manufacturers also tend to generate higher cash flow for capital reinvestment and debt reduction. In addition, they generally have greater access to the capital markets, which can reduce the cost of capital. Revenue is an indicator of scale.
Business Profile: The business profile of a manufacturing company is important because it greatly influences its ability to generate sustainable earnings and operating cash flows. Core aspects of a manufacturing company's business profile are its market position, the breadth and stability of the end-markets it serves, the diversity of its product offerings, as well as the effectiveness of the company's cost structure.
Profitability and Efficiency: Profits are considered because they are needed to generate sustainable cash flow and maintain a competitive position, which includes an ability to invest in marketing, research, factories, and personnel. High profitability sustained over time is generally an indicator of operating efficiency and competitive advantage. EBITA Margin is an indicator of profitability and efficiency.
Leverage and Coverage: Leverage and cash flow coverage measures provide indications of a company's financial flexibility and ability to sustain its competitive position, as well as how much financial risk a manufacturer is willing to undertake. A manufacturer with strong financial flexibility is better able to invest in product innovation and adapt to changing customer preferences and competitive challenges than a manufacturer with a constrained capital structure. The capital intensity of the manufacturing sector also makes financial flexibility critical to absorbing unexpected costs and withstanding industry cyclicality. Indicators of leverage and coverage include ratios such as: Debt/ EBITDA, EBITA/ Interest Expense, Free Cash Flow/ Debt, and Retained Cash Flow/ Net Debt.
Financial Policy: Financial policy encompasses management and board tolerance for financial risk and commitment to a strong credit profile. It is an important rating determinant because it directly affects debt levels, credit quality, the future direction for the company and the risk of adverse changes in financing and capital structure. Financial risk tolerance serves as a guidepost to investment and capital allocation. Liquidity management is an important aspect of overall risk management and can provide insight into risk tolerance.
Other Rating Considerations: Other considerations may include but are not limited to: financial controls and the quality of financial reporting; corporate legal structure; the quality and experience of management; assessments of corporate governance, as well as environmental and social considerations; exposure to uncertain licensing regimes; and possible government interference in some countries. Regulatory, litigation, liquidity, technology, and reputational risk, as well as changes to consumer and business spending patterns, competitor strategies and macroeconomic trends, are also considered.
• AAC Technologies Holdings Inc.
• Ansell Limited
• CRRC Corporation Limited
• Doosan Bobcat Inc.
• Pan Brothers Tbk (P.T.)
• Shanghai Electric (Group) Corporation
• Sri Rejeki Isman Tbk (P.T.)
• Sunny Optical Technology (Group) Co. Ltd.
The principal methodology used for these rated entities was Manufacturing (Japanese) published in September 2021. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Manufacturing (Japanese)
Scale: Scale is a consideration because it is an indicator of the overall depth of a company's business and its success in attracting a variety of customers, as well as its resilience to shocks, such as sudden shifts in demand or rapid cost increases. Larger manufacturing companies typically attract a greater breadth of customers and can better withstand cyclicality resulting from economic conditions and product cycles. A larger revenue base also generally leads to important economies of scale in raw material purchases and corporate functions, particularly important given the need for global supply chain management to control costs for most manufacturing companies. Larger manufacturers also tend to generate higher cash flow for capital reinvestment and debt reduction. In addition, they generally have greater access to the capital markets, which can reduce the cost of capital. Revenue is an indicator of scale.
Business Profile: The business profile of a manufacturing company is important because it greatly influences its ability to generate sustainable earnings and operating cash flows. Core aspects of a manufacturing company's business profile are its market position, the breadth and stability of the end-markets it serves, the diversity of its product offerings, as well as the effectiveness of the company's cost structure.
Profitability and Efficiency: Profits are considered because they are needed to generate sustainable cash flow and maintain a competitive position, which includes an ability to invest in marketing, research, factories, and personnel. High profitability sustained over time is generally an indicator of operating efficiency and competitive advantage. EBITA Margin is an indicator of profitability and efficiency.
Leverage and Coverage: Leverage and cash flow coverage measures provide indications of a company's financial flexibility and ability to sustain its competitive position, as well as how much financial risk a manufacturer is willing to undertake. A manufacturer with strong financial flexibility is better able to invest in product innovation and adapt to changing customer preferences and competitive challenges than a manufacturer with a constrained capital structure. The capital intensity of the manufacturing sector also makes financial flexibility critical to absorbing unexpected costs and withstanding industry cyclicality. Indicators of leverage and coverage include ratios such as: Debt/ EBITDA, EBITA/ Interest Expense, Free Cash Flow/ Debt, and Retained Cash Flow/ Net Debt.
Financial Policy: Financial policy encompasses management and board tolerance for financial risk and commitment to a strong credit profile. It is an important rating determinant because it directly affects debt levels, credit quality, the future direction for the company and the risk of adverse changes in financing and capital structure. Financial risk tolerance serves as a guidepost to investment and capital allocation. Liquidity management is an important aspect of overall risk management and can provide insight into risk tolerance.
Other Rating Considerations: Other considerations may include but are not limited to: financial controls and the quality of financial reporting; corporate legal structure; the quality and experience of management; assessments of corporate governance, as well as environmental and social considerations; exposure to uncertain licensing regimes; and possible government interference in some countries. Regulatory, litigation, liquidity, technology, and reputational risk, as well as changes to consumer and business spending patterns, competitor strategies and macroeconomic trends, are also considered.
• Daikin Industries, Ltd.
• FUJIFILM Holdings Corporation
• Hitachi, Ltd.
• Komatsu Ltd.
• Mitsubishi Electric Corporation
• Nidec Corporation
• Panasonic Corporation
• Sumitomo Electric Industries, Ltd.
• TDK Corporation
• Toyota Industries Corporation
The principal methodology used for these rated entities was Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts published in May 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Key rating considerations on a forward-looking basis may include but are not limited to the following summarized below.
Rating Transactions Based on the Credit Substitution Approach: Letter of Credit-backed, Insured and Guaranteed Debts
Third-party credit support: The goal of third-party credit support is to substitute the credit risk of the support provider for the credit risk of the issuer. For credit substitution to be achieved, investors must be insulated from the risk of payment default by the underlying obligor. Generally, the long-term ratings on credit-supported transactions track the long-term rating assigned to the credit provider.
Additional Considerations: Credit substitution requires more than just the presence of a credit support instrument from a third-party credit provider. The transaction documentation provides clear instructions to ensure that payments under the credit support facility are made when due and that there are no impediments to the timely payment of debt service. The key elements evaluated include: mitigation of bankruptcy risk of issuer; sufficiency of credit support; structural provisions which provide for the timely payment of debt service; bondholders to be paid in full if credit support expiration or termination will result in a change.
• Doosan Heavy Industries & Construction Co Ltd
This announcement applies only to Rated Entities with EU rated, UK rated, EU endorsed and UK endorsed ratings. Rated Entities, with Non EU rated, non UK rated, non EU endorsed and non UK endorsed ratings may be referenced herein to the extent necessary, if they are part of the same analytical unit.
Please see the Issuer page on www.moodys.com, for each of the ratings covered, most updated credit rating action, rating history, and Credit Rating action Press Release including the rating rationale and factors that could lead to a rating upgrade or downgrade.
This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.
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