Moody’s hails Australian earnings reports

More local companies have raised than hurt Moody’s confidence in their current debt ratings.

The recent earnings season failed to inspire traders, but it painted a largely positive picture on Australia’s largest companies for a leading ratings agency.

In a report on the annual reporting season released today, Moody’s said fewer than 20 per cent of the corporates it rates delivered results that raised questions about the sustainability of their current debt rating.

In contrast, almost half delivered earnings reports that lifted confidence in the current rating.

“Of the 21 non-financial corporates that we rate, 10 reported credit positive results, seven reported credit neutral results and the remaining four reported credit negative results,” Ian Chitterer, a Moody’s vice president and senior analyst said.

The group singled Qantas out for praise, while noting the resources sector was “mixed”.

“BHP Billiton and Woodside Petroleum experienced significant earnings declines for fiscal 2016, due to weaker commodity prices; resulting in a breach of Moody’s tolerance levels for their respective ratings,” the group said.

“However, the ratings agency expects credit metrics to improve to align with expectations as a consequence of commodity price stabilisation and ongoing cost-reduction initiatives.”

Gold miner Newcrest and iron ore miner Fortescue were tagged as outperformers through the season, with the latter winning a recent upgrade from the ratings agency.

Moody’s reiterated its warning on Woolworths’ rating, with the supermarket giant’s heavy loss “increasing the likelihood of a downgrade”.

The retailer’s major rival Wesfarmers was seen delivering results that matched up with Moody’s required financial metrics for its current rating.

Moody’s added that improving industry conditions aided the results of companies within the engineering, real estate and construction sectors, while the big banks were in neutral territory.