Moody’s Investor Services has reaffirmed credit ratings for several prominent companies in Saudi Arabia. This comes following an update to its Government-Related Issuers Methodology. This reaffirmation underscores the robust financial health, strategic importance, and potential growth trajectories of these companies within Saudi Arabia’s economy.
Saudi Basic Industries Corporation
SABIC maintains its A1 rating, reflecting its strong global presence in the petrochemicals and fertilizer market, competitive cost structure, and solid financial performance. The company also has excellent liquidity. Moody’s acknowledges SABIC’s strengths while highlighting considerations such as the cyclical nature of its operations and geographic concentration in Saudi Arabia.
Saudi Telecom Company
stc also retains its A1 rating, driven by its dominant position in the Saudi telecommunications sector. Hence, it has a market share of around 71 percent. Moreover, stc has strong financial metrics and significant government support. Despite its strengths, Moody’s notes challenges such as market competition in Saudi Arabia, the sizeable dividends, and significant fluctuations in receivables, which weigh on stc’s free cash flow (FCF).
Saudi Electricity Company
SEC’s A1 rating considers the low business risk profile of its integrated electricity operations, market dominance, and regulatory support. Moody’s also takes into account its limited track record under the current regulatory framework, the shareholder instrument that increases its debt servicing costs, and its growing debt load.
Ma’aden
Ma’aden holds a Baa1 rating due to its diversified production, low-cost profile, and supportive shareholders with high credit quality. Moreover, Moody’s highlights its strategic significance to Saudi Arabia’s economy, a track record of financial deleveraging, cautious financial policies, and robust liquidity.
Moody’s has highlighted areas of focus including commodity price volatility and the company’s expansion plans. It also highlights execution risks related to the company’s production capacity expansion and mining exploration projects.
Positive outlook
The positive outlooks for SABIC, stc, and SEC align with Moody’s view on Saudi Arabia’s government, indicating a high likelihood of state support. Conversely, potential rating changes for these companies hinge on various factors outlined by Moody’s, including government ratings, operational performance, and liquidity management. These include improvements in revenue and profitability, debt management, and changes in the perceived likelihood of government support.
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