New York, August 17, 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 10 August 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 the rated entities listed below was Mining published in October 2021. Please see the Rating Methodologies page on https://ratings.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.
Mining
Scale: Scale is a consideration because it provides indications of a company's revenue-generating capability, its overall market strength and importance to the markets it serves, and its resilience to changes in commodity prices and demand. Companies with larger scale generally have greater flexibility to manage their businesses under different price and demand scenarios, which is important in an industry that is cyclical. A large revenue base can also lead to economies of scale that lower overall costs for raw materials and to efficiencies for corporate administration of the business, in areas such as finance, legal, tax and accounting. Larger companies also tend to generate higher cash flow for capital reinvestment and debt reduction and have greater access to the capital markets, which can reduce the cost of capital. Total revenue is an indicator of scale.
Business Profile: A mining company's business profile is an indicator of its ability to generate earnings and cash flow and the relative stability and sustainability of that cash flow, which are important considerations in an industry characterized by cyclicality and high price volatility. Susceptibility to environmental, regulatory, and political risk is another important aspect of a company's business profile. The location and number of a company's mines is also a consideration because having multiple, discrete assets in different regions typically lessens the impact of strikes, equipment failures, operational event risks, or other events that could curtail production. Geographic diversity also helps mining companies mitigate the impact of trade barriers and tariffs on exports.
Profitability: Profits are considered because they are needed to generate sustainable cash flow through different economic environments, reinvest in strategic growth projects and service debt and other obligations, which are especially important for an industry as capital-intensive as mining. How well a company can control its costs is a consideration because of the industry's price volatility, limited pricing power and vulnerability to fluctuations in input costs. A strong cost position is an important indicator of a company's ability to maintain profitability during a downturn. EBIT margin is one indicator of profitability.
Leverage and Coverage: Leverage and cash flow coverage measures provide indications of how much financial risk a mining company is willing to undertake. These metrics are also indications of the company's ability to sustain its competitive position, invest in growth opportunities and service debt. Ratios including EBIT/ Interest, Debt/ Book Capitalization, Cash from Operations minus Dividends/ Debt are indicators of leverage and coverage.
Financial Policy: Financial policy encompasses management and board tolerance for financial risk and commitment to a strong credit profile. It is a consideration, 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 also considered and can provide insight into risk tolerance.
Other Considerations: 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 are also considered.
• ABM Investama Tbk (P.T.)
• Adaro Indonesia (P.T.)
• Alcoa of Australia Limited
• Bayan Resources Tbk (P.T.)
• BHP Group Limited
• Bumi Resources Tbk (P.T.)
• China Minmetals Corporation
• China National Gold Group Co., Ltd.
• Coronado Global Resources Inc.
• Fortescue Metals Group Ltd
• Freeport Indonesia (P.T.)
• Golden Energy And Resources Ltd
• Indika Energy Tbk (P.T.)
• Indonesia Asahan Aluminium (Persero) (P.T.)
• Korea Mine Rehabilitation & Mineral Res Corp
• Mineral Resources Limited
• Newcrest Mining Limited
• Shandong Energy Group Company Limited
• South32 Limited
• Yankuang Energy Group Company Limited
The principal methodology used for the rated entities listed below was Business and Consumer Services published in November 2021. Please see the Rating Methodologies page on https://ratings.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.
Business and Consumer Services
Scale: Scale is considered because larger scale can be an indicator of a company's ability to influence business trends and pricing within its service segments and to support a stable or growing market position. Scale also can be an indicator of greater resilience to changes in demand, geographic diversity, cost absorption, R&D capabilities and of greater bargaining strength with customers, labor, and vendors. Revenue is an indicator of scale.
Business Profile: The business profile of a company is considered because it greatly influences its ability to generate sustainable earnings and operating cash flows. The business and consumer service industry comprises a vast array of business models encompassing a multitude of identifiable customer bases worldwide. We consider the underlying demand characteristics of a company's service offerings and their relative breadth, strength, and endurance of demand. Companies that have established a long history of strong demand for a diverse range of service offerings that are critical to customer needs generally entail lower risk compared to those that offer a single line of service which have less importance for customer needs or have a limited history of success.
Profitability: Profits matter because they are necessary to maintain a business's competitive position, including sufficient reinvestment in marketing, research, facilities, and human capital. Sustained high profitability is generally a strong indicator of substantial competitive advantages, particularly if combined with evidence of a stable or rising market share. EBITA Margin is an indicator of profitability.
Leverage and Coverage: Leverage and coverage measures are indicators of a company's financial flexibility and long-term viability, including its ability to adapt to changes in the economic and business environment within the segments in which it operates. Indicators of leverage and coverage include ratios such as: Debt / EBITDA, EBITA / Interest Expense, and Retained Cash Flow/ Net Debt.
Financial Policy: Management and board tolerance for financial risk is a consideration because 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 for the company to achieve its targets. Financial risk tolerance serves as a guidepost to investment and capital allocation.
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 also affect ratings.
• Bukit Makmur Mandiri Utama (P.T.)
• Perenti Global Limited
• Thiess Group Holdings Pty Ltd
The principal methodology used for the rated entities listed below was Equipment and Transportation Rental published in February 2022. Please see the Rating Methodologies page on https://ratings.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.
Equipment and Transportation Rental
Scale: We consider scale 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 s, such as sudden shifts in demand or rapid cost increases Scale not only takes into account size, but also reflects customer and geographic diversification as well as equipment investment. Large rental companies, particularly those with contiguous operations, can share equipment and maintenance staff across a large area. This ability improves equipment utilization rates and allows companies to maintain their fleet more efficiently, as well as improve service to customers by providing greater equipment availability. Scale also often allows large rental companies enhanced purchasing power when buying equipment from Original Equipment Manufacturers, which can aid in their overall profitability. Scale is measured using total reported revenue.
Business Profile: We consider the business profile as relevant in assessing credit quality for companies in the equipment and transportation rental industry. Entry into this industry requires significant capital investment, the need for which can extend through the cycle. companies seek to efficiently manage their fleet with the goal of maximizing returns on the equipment over the long term. Companies with relatively stronger market positions generally have geographically diverse operations, a broader customer base and a range of well-maintained or newer equipment. Companies with these characteristics can also benefit from comparatively higher equipment utilization and lower maintenance costs. Such companies are in stronger positions to fund necessary investments, and often have a lower cost of capital. In our qualitative assessment, we consider the expected volatility of a company's results and the strength of its market position. In addition, we consider a company's fleet management and the level of its equipment utilization. Cost-effectiveness is also assessed.
Profitability: Profitability provides a measure of the company's ability to generate sustainable cash flow and maintain a c competitive position. Pretax Income as a percentage of Sales is an indicator of profitability and it provides an indication of the overall efficiency of a company's cost structure which is an important consideration in a capital intensive industry.
Leverage and Coverage: Leverage and coverage measures provide indications of a company's financial capacity and long-term viability... These metrics are indicators of a company's ability to sustain its competitive position, access capital to invest in its business and service debt through difference phases of the economic cycles. Among others, ratios such as Debt/EBITDA, EBITDA/ 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, our assessment of the quality of management, corporate governance, financial controls, liquidity management, event risk and seasonality.
• Emeco Holdings Limited
The principal methodology used for the rated entities listed below was Government-Related Issuers Methodology published in February 2020. Please see the Rating Methodologies page on https://ratings.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.
• China Minmetals Corporation
• China National Gold Group Co., Ltd.
• Indonesia Asahan Aluminium (Persero) (P.T.)
• Korea Mine Rehabilitation & Mineral Res Corp
• Shandong Energy Group Company Limited
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 https://ratings.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 issuer/deal page on https://ratings.moodys.com
for the most updated credit rating action information and rating history.
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