"While the nine corporates we rate in Thailand have all been affected by the floods to varying degrees and in different ways, we do not expect the temporary pressures on their businesses to directly affect their ratings," says Philipp Lotter, a Moody's Associate Managing Director. The nine include six energy and utilities companies, one beverage company, and two telecommunications companies.
Lotter was speaking on the release of a Moody's report evaluating the impact of the floods on Moody's-rated corporates. Moody's estimates the damage from the disaster will exceed THB200 billion, or 2% of gross domestic product.
"Although credit negative for Thailand (Baa1 stable), we do not expect the deluge to undermine the government's creditworthiness, which is supported by the robust economic recovery of the past three years, and the stabilization of government finances," Lotter adds.
According to the report, Thailand's worst flooding in 50 years is unlikely to directly affect the ratings of issuers in the energy sector as their power plants, refineries and petrochemical plants are located in areas which so far have been free of flooding.
The Thai energy companies that Moody's rates are Ratchaburi Electricity Generating Holding PCL (Baa1, stable); and PTT Public Co, or PTT (Baa1, stable), its subsidiary PTT Exploration & Production (Baa1, stable), and affiliated companies PTT Global Chemicals Ltd. (Baa2, stable), IRPC Public Company Limited (Baa3, stable) and Thai Oil Public Company (Baa1, stable). "These companies have adequate headroom to absorb the temporary setbacks caused by the flooding, as they have benefited from strong results in the earlier part of this year," Lotter says.
However, the floods will hurt the profits of Thai Beverage Public Co (Baa2, stable) due to lower sales volumes, combined with logistics and supply chain issues, but it is difficult to quantify the impact at the moment. However, ThaiBev's liquidity position remains supported by its strong banking relationships and it may also benefit from a central bank commitment to ease financing terms for affected companies.
Finally, the impact on mobile operator True Move (B2, stable) and fixed-line and broadband services provider True Corp's (B2, stable) wireless business has so far been quite small. Moody's believes the companies have sufficient liquidity and cash balances to undertake precautionary measures to deal with the floods.
The report is titled, "Thai Floods Pressure Domestic Companies, But Threat to Ratings is Limited." It can be found on www.moodys.com.