5th Nov 2019 18:57
(Alliance News) - Moody's Investors Service late Tuesday affirmed the Baa2 long term issuer rating of Anglo American PLC, with stable outlook.
"Our decision to affirm Anglo American's rating and maintain the stable outlook follows the negative rating action on the South African sovereign rating where Moody's affirmed the Baa3 rating but changed the outlook to negative from stable," says Sven Reinke, a Moody's senior vice president.
Anglo American has assets in many countries, but has a large exposure to South Africa, the rating agency believes. Moody's estimates that Anglo American generates around 40% of its reported earnings before interest, taxes, depreciation, and amortization in South Africa and the dual-listed company is also subject to exchange controls imposed by the South African Reserve Bank.
Moody's said Anglo American has operated "successfully" in South Africa for many decades and, therefore, it does not expect a moderately weaker sovereign creditworthiness to impact the company's South African operations "materially".
However, the rating agency also believes that Anglo American's operating performance might not be fully unaffected should the operating environment in South Africa deteriorate "severely".
Turning to outlook, Moody's said it reflects its view that Anglo American's strong capital structure and the ongoing focus on production cost should increase its resilience to "volatile" commodity prices.
The outlook also reflects Moody's expectation that Anglo American's financial policy will continue to prioritize an investment grade financial profile over shareholder returns.
Looking ahead, Moody's said further upward rating movement is limited in the medium-term, given the volatility in commodities and potential for wide swings in performance, as well as Anglo American's exposure to assets located in South Africa.
However, the company's rating could come under negative pressure, Moody's said, if the rating differential to the South African sovereign rating increases beyond two notches.
By Evelina Grecenko; [email protected]
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