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Moody's Investors Service says that ongoing weakness in commodity prices will continue to directly impact Australian mining companies, with knock-on effects on other sectors, particularly the mining services sector.
"In the last 12 months, we have taken negative rating actions on three of Moody's four rated Australian mining services companies. The negative outlooks on these three companies reflect our view that further downside risk remains at an elevated level, in particular with regard to potential contract deferrals and cancellations", says Saranga Ranasinghe, a Moody's Analyst.
"As such, further negative rating actions are likely, and we do not see any catalyst for a strong rebound in commodity prices in 2015 and expect average prices for the year to remain near current levels," adds Ranasinghe.
Ranasinghe's conclusions were contained in an article titled "Pressure Remains on Australian Mining Services Providers as No Rebound in Commodity Prices in Sight".
The article appeared in the latest Moody's Australian Edition of its High Yield Interest newsletter. This publication highlights Moody's efforts to expand our analysis of Australian high-yield related topics.
The article notes that the lower Australian dollar and oil prices are providing an eagerly-needed benefit for the mining industry, but all metal producers will still suffer earnings and cash-flow deterioration in 2015.
With the exception of Bis Industries Group Ltd. (B2 stable), revenue and earnings have decreased by double-digit percentages for three of Moody's four rated mining services providers.
The mining services companies subject to negative rating actions over the last 12 months were Emeco Holdings Limited (B3 negative); Ausdrill Limited (Ba3 negative); and Barminco Holdings Pty Limited (B2 negative).
The newsletter's other key articles on the Australian high yield sector included:
High Yield Ratings and Bond Issuance Update
Ratings Withdrawals Lowers Australian Liquidity Stress Index (LSI)
The newsletter also has reports on the Asian and US high yield markets.
Subscribers can access the newsletter at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_179108
