Construction materials company Boral has had its BBB credit rating and stable outlook affirmed by S&P Global Ratings (S&P). The 29 October affirmation follows Moody’s Investors Services (Moody’s) affirming the company’s investment grade credit rating of ‘Baa2’ with a stable outlook in August.
Following normal procedures, both credit rating agencies reviewed Boral’s credit rating following the increased shareholding interest of Seven Group Holdings Limited (SGH) to 69.6% in July 2021.
Moody’s affirmation of Boral’s ratings reflected the strength of Boral’s balance sheet, its leading market position in Australia and Moody’s expectation that the company’s Australian operations will benefit from government stimulus measures that support construction.
S&P’s confirmation of a stable outlook for the company reflects its expectation that moderating COVID-19 effects, cost savings associated with Boral’s transformation program, and ongoing adherence to the group’s financial policy framework, should underpin credit quality at the BBB rating level over the next two years.
Boral’s significant asset divestments over the past 18 months have refocused the company to its Australian operations. Its transformation program is targeting $AUD200 million to $AUD250 million of annualised earnings uplift by 2025 in its Australian operations, of which $AUD75 million has been achieved in fiscal 2021.
S&P views the transformation program, together with moderating impacts from the COVID-19 pandemic, to support earnings growth over the next two years.
S&P considered that Boral’s governance arrangements, including a majority of independent directors on its board and the appointment of an independent directors committee, ensures that the company will have effective influence in its own key decision-making.
It also expects Boral to fund its capital return of up to $3 billion to investors, following the sale of non-core businesses, within tolerances for the BBB rating.
In response to the rating being affirmed, Boral’s Chief Finance and Strategy Officer Tino La Spina said: “We welcome the decision by S&P to affirm its investment grade credit rating and stable outlook for Boral. This credit rating recognises the strength of Boral’s governance processes, financial framework and our disciplined approach to managing Boral’s balance sheet.”
Further details of Boral’s S&P credit ratings can be found in the ASX release.
By Atara Thenabadu