The rating on HWL reflects the group’s good cash flows from diverse businesses that have competitive positions ranging from good to strong. HWL’s record of divesting assets and realizing value from diverse assets, and strong liability management and financial flexibility also support the rating. The group’s “strong” liquidity, as defined in our criteria, is also a rating strength, in our view.
We expect HWL’s financial performance in the second half of 2012 to be better than in the first six months of the year due to seasonality and continued operational improvements. The group’s first-half results were satisfactory, in our opinion, despite weaker operating conditions. EBITDA before asset disposals and property revaluation rose moderately from a year ago.
HWL’s profitability outlook is fair, in our view. We expect contributions from new investments in utilities and operational improvements at the group’s 3G and retailing businesses to offset lower energy prices and discretionary retail spending. HWL’s business and geographic diversity should mitigate the effects of the group’s exposure to weakening economies in Europe.
The outlook on the corporate credit rating is stable, reflecting our expectation that HWL will generate satisfactory cash flows, manage its leverage at its target ratio of net debt to net capital of 25%, and maintain strong liquidity. Our outlook also factors in the group’s strong financial flexibility, including its willingness and record of divesting assets to raise funds, and its effective control over cash-rich affiliates to stabilize its credit profile.
-- Methodology: Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008