International credit rating agency Moody’s has announced that it has revised the outlook of South Korean steelmaker Pohang Iron and Steel Co. (POSCO) to stable from negative and at the same time it has affirmed the company's Baa2 senior unsecured rating.
Moody’s stated that the rating action mainly reflects its expectation that POSCO's financial profile will improve significantly for all of 2016 and stay stable over the next 12-18 months, underpinned by a recovery in earnings and debt reductions. Moody's also expects that POSCO's profitability in the fourth quarter of the current year will be better than that in the fourth quarter of 2015, although weaker than the level achieved in third quarter this year.
However, Moody's expects that POSCO's operating income will fall moderately in 2017, because the level of earnings achieved in the third quarter this year is not sustainable, based on overcapacity issues in China and South Korea, as well as sluggish key end-markets in South Korea, such as in the shipbuilding and automobile sectors.