S&P downgrades SingPost's credit rating to A- with stable outlook
Singapore
STANDARD & Poor's (S&P) has cut Singapore Post's long-term credit rating from "A" to "A-", with a stable outlook amid increased earnings volatility.
The credit ratings agency also trimmed its ratings for SingPost on the long-term Asean regional scale, as well as the mail carrier's various outstanding debt.
The downgrade follows a Nov 6, 2015 decision by S&P to place SingPost on CreditWatch with negative implications.
S&P said in a report: "We believe SingPost's transformation into a logistics and e-commerce provider will increase contributions from these businesses relative to its traditional postal business, increasing overall earnings volatility.
"Postal services have higher and more stable margins than the more competitive logistics and e-commerce segments, where SingPost's market position is less established."
If SingPost fails to keep its debt-to-Ebitda (earnings before interest, tax, depreciation and amortisation) ratio below two times on a sustained basis, the rating could fall further.
However, S&P expects SingPost to strengthen its balance sheet: "The stable outlook reflects our expectation that SingPost will reduce its debt markedly, such that the debt-to-Ebitda ratio is below 2.0 times by end-March 2017, following its recent high spending on existing infrastructure and growth."
An upgrade is considered unlikely over the next two years, however, "given the company's exposure to declining mail volumes and the strong competitive pressures in the logistics and express delivery businesses", S&P said.
In a statement, SingPost said its credit rating remains strong among its peers.
"The company is financially disciplined in its approach to investments and manages business risk as a fundamental process of its transformation into an integrated end-to-end e-commerce logistics group with a stable postal platform.
"SingPost is committed to maintaining an investment-grade credit rating and the best long-term interest of its stakeholders."
