Rinker Group gets A3 rating from Moody’s

Moody’s Investors Service has today affirmed the A3 senior unsecured rating of Rinker Group Limite. Moody’s said its rating affirmation reflects the ongoing strength in the company’s underlying operations and incorporates the potential for a reasonable level of acquisitions or capital returns. Moody’s anticipates that any acquisition or capital return would be structured in such a way as to retain the current A3 rating. The rating outlook is stable.

Rinker’s rating recognizes its 1) leading position in US and Australian construction materials industries, 2) reasonable diversity of geographic risk, 3) consistent and focused management strategy and 4) sound history of integrating acquisitions and enhancing margins.

The rating for Rinker reflects the group’s position as the third-largest construction materials producer in the US, with operations concentrated in high population growth areas. The group’s earnings are 80 per cent sourced from the US, where it supplies a wide range of construction products including aggregates, cement, concrete pipes and asphalt. The remaining 20 per cent of earnings are derived primarily from the Australian-based Readymix concrete business, which operates in Australia and China. The Australian operations have earned strong market positions in concrete and aggregates in a vertically integrated operation.

The group has experienced growth from strong residential and industrial construction demand in the US, with some softness in the Australian market limiting revenue growth. Moody’s expects that growth will moderate in the key US market, as the level of residential housing activity is expected to fall in the medium term. This softening may be offset by growth in government infrastructure spending and an improvement in the commercial sector, in the US over the same period of time.