TEXT-S&P Publishes 5 Reports On Aust Corp Sector Outlook For 2013

Tue Nov 13, 2012 8:56pm EST

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(The following was released by the rating agency)

MELBOURNE (Standard & Poor's) Nov. 14, 2012--The credit outlook for Australia's corporate sectors is broadly stable going into 2013 but pockets of stress remain, Standard & Poor's Ratings Services highlighted in a series of five reports published recently (see Related Research).

For Australia's mining companies, the longer term pace of China's growth will sustain mining exports and consequently, commodity prices. However, we do not expect commodity prices to return to their peaks in 2013. In such a scenario, Australian miners' cost-cutting and capital rationalization efforts would ultimately shape their creditworthiness.

Conversely, high oil prices are lifting the prospects of oil and gas companies. These companies are racing to reap the benefits with several liquefied natural gas (LNG) projects in the pipeline. But huge execution risks loom. Persistent infrastructure bottlenecks and limited resources could threaten these projects.

The Australian retail sector is struggling with sluggish demand as the global uncertainty and slowdown in Australian nonmining industries have curbed customer's discretionary spending. On the other hand, subscriber demand for mobile and data services is ramping up. And, in the gaming sector, casinos are poised to attract VIP gamblers from Asia and local punters from pubs and clubs with their capacity expansion.

The sliding domestic housing market has cast a shadow over real estate developers. We believe soft consumer confidence is largely the cause of this deterioration. Furthermore, we forecast that the Australian economy will soften, delaying a recovery in the housing markets. But we expect the impact on residential mortgage backed securities to be muted, with defaults and losses staying low.

The project finance sector is largely immune from macroeconomic conditions because of their availability-based contracts, while the airports and ports are likely to see further robust demand. In contrast, the utilities and toll-road sector appear to face flat to modest growth prospects. For regulated utilities, we consider that regulatory uncertainty is casting some uncertainty on their businesses. Across the project finance, utilities, and toll-road sectors, liquidity and refinancing issues continue to be key rating factors.

The reports are available to RatingsDirect subscribers on the Global Credit Portal at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com.

Ratings information can also be found on Standard & Poor's public Web site at www.standardandpoors.com; under Ratings in the left navigation bar, select Find a Rating. Members of the media may request a copy by contacting Richard Noonan, at 613 9631 2152 or emailing richard_noonan@standardandpoors.com.

RELATED RESEARCH

-- Australian Corporate Sectors 2013: Ratings Downward Trend To Subside, Nov. 12, 2012

-- Australian Corporate Sectors 2013: Subdued Consumer Demand For Retail, But Strong For Gaming And Telecoms, Nov. 14, 2012

-- Australian Corporate Sectors 2013: Weak Commodity Prices Weigh On Miners; Project Execution Risk Rises For Oil And Gas Companies, Nov. 14, 2012

-- Australian Corporate Sectors 2013: Largely Stable For Project Finance, Infrastructure, And Utilities Amid Mixed Growth Prospects, Nov. 14, 2012

-- Australian Corporate Sectors 2013: Flat Housing Market Strains Real Estate Developers And REITs, Nov. 14, 2012

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