TEXT-S&P : Sumitomo Electric assigned 'A-1' short-term rating
(The following statement was released by the rating agency)
Sept 28 - Standard & Poor's Ratings Services today assigned an 'A-1' short-term corporate credit rating to leading Japan-based wire and cable manufacturer Sumitomo Electric Industries Ltd. (A/Stable/A-1). At the same time, we affirmed our 'A' long-term corporate credit and debt ratings on the company. The outlook on the long-term corporate credit rating remains stable.
We base our assignment of a short-term rating on the link between the long- and short-term ratings on an issuer, together with our assessment of its liquidity. We take the view that Sumitomo Electric has "adequate" sources of liquidity.
Sumitomo Electric is strongly competitive in the global market for wiring harnesses for autos. The company has a diversified business portfolio, which, in addition to wiring harnesses for autos, features products with different business cycles. This range of products supports the relatively high stability of the company's earnings and helps mitigate overall business risk. In addition, Sumitomo Electric maintains a "modest" financial risk profile anchored in relatively stable cash flow and a conservative financial policy. Conversely, the company's relatively high reliance on earnings in the auto business partially offsets these strengths, as does exposure to tough competition, persistent pressure on prices from customers, and fluctuating prices for raw materials.
We view Sumitomo Electric's liquidity to be "adequate," with sources of liquidity likely to equal or exceed 1.2x uses for the next two years. As of March 31, 2012, the company had JPY145 billion in cash and marketable securities, exceeding JPY20 billion in long-term debt due to mature within a year. The company's strong relationships with its main creditor banks produce low refinancing risks for its short-term bank borrowings, in our view. We expect the company's liquidity to sufficiently cover capital expenditures and other uses of cash.
RELATED CRITERIA AND RESEARCH
2008 Corporate Criteria: Analytical Methodology, April 15, 2008
Methodology: Short-Term/Long-Term Ratings Linkage Criteria For Corporate And Sovereign Issuers, May 15, 2012
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