Standard & Poor’s Ratings Services revised its outlook on cement producer Texas Industries Inc. (TXI) to stable from positive. All ratings, including the ’BB-’ corporate credit rating, were affirmed.
"The outlook revision reflects our assessment that because of the combination of weakening commercial construction and high energy costs, the company’s operating performance over the next several quarters will be weaker than previously expected," said Standard & Poor’s credit analyst Michael Scerbo. "As a result, credit measures are likely to be more in-line with the current rating preventing an upgrade within our outlook time horizon."
Previously, a higher rating was predicated on the company improving its overall financial profile following the completion of its ongoing capital expansion plans, which is not likely to occur given the challenging market conditions.
The ratings on Dallas-based TXI reflect its much smaller scale of operations than global competitors’, the cement industry’s cyclicality and seasonality, high capital and energy intensity, and market and asset concentration in Texas and California. Supporting the ratings are the high long-term demand for cement in the U.S. relative to total production capacity, good operating margins, adequate liquidity, and credit measures that are in-line with the rating.