Moody’s Investors Service has today confirmed Lafarge S.A.’s Baa3 issuer rating. The rating outlook is negative. Moody’s has also confirmed Lafarge North America, Inc’s and Lafarge Cement UK plc’s Baa3 issuer ratings.
Today’s rating action concludes the review for possible downgrade, which was initiated on 3 August 2010.
"The confirmation was prompted by Moody’s expectation that over time, Lafarge’s capital structure will move closer to ratios that are in line with an investment grade rating," says Matthias Hellstern, a Moody’s Senior Vice President and lead analyst for Lafarge. Moody’s is of the opinion that the metrics have been also impacted by cyclical (i.e. a slower recovery in end markets) and exceptional factors (i.e. FX currency impact on the US dollar denominated debt) that have weighed on the metrics, and delayed the path to recovery to target metrics for the rating category by about one year from previous expectations. Lafarge has undertaken meaningful deleveraging measures since 2008, such as a rights issue, reduction of capex, divestments, cost cutting efforts and efficient working capital management, which have been offset to some extent by the decision to increase the dividend payment in 2010.
Finally the strong liquidity profile and reasonably balanced debt maturity profile should provide adequate time for the company to recover a stronger financial profile over the next 12 to 18 months.