(Moody’s Investor Service, 16.Jul.2015) – Economic stagnation, a difficult political environment and heightened volatility in financial markets with the approach of presidential elections will be elevating pressures on non-financial companies in Argentina through mid-2016, says Moody’s Investors Service. Most of the 20 companies that Moody’s rates in Argentina, however, will not see significant deterioration in their credit metrics during this period.
“Weak economic activity and high double-digit inflation will diminish companies’ ability to pass cost increases to their customers, limiting their operating margins,” says Martina Gallardo Barreyro in the report “Corporate Credit Quality in Argentina: Economic Woes Elevate Argentina’s Corporate Risk Through Mid-2016.”
“In addition, a complicated macro environment will keep intensifying liquidity risks for most Argentine companies,” says Moody’s Gallardo Barreyro.
Some rated companies, however, have significantly improved their overall liquidity profile through refinancings of their foreign-denominated maturities. For examples in Jul.2015 Raghsa S.A. pushed back 58% of its $100 million maturities due in 2016-2017 until 2020-2021.
Moody’s expects consumer-related companies to face a slight deterioration in their credit metrics as demand stabilizes.
“Long-term demand growth will require a recovery in real available income, employment levels and general consumer financing conditions, all of which depend on government policies,” says Gallardo Barreyro.
Moody’s expects a sluggish recovery in Argentina only in 2016.
In other sectors, Moody’s expects marketing campaigns designed to capture new customers interested in 4G technology to strain the operating margins of the fixed telephony operators, while a strong increase in public-works spending in 2015 will support revenue growth among construction and infrastructure-related companies.
Commodity driven companies will have slow revenue growth because of falling commodity prices, while the impact of high inflation among them will vary. For example, oil companies such as YPF S.A. will be able to pass along most of their cost increases through to their prices.
***