Moody’s Investors Service has upgraded to B1 from B2 the corporate family rating (CFR) of French container shipping company CMA CGM.
At the same time, Moody’s has upgraded to B1-PD from B2-PD its probability of default rating (PDR) and to B3 from Caa1 its senior unsecured rating. The outlook on all the ratings is stable.
The rating action reflects CMA CGM’s continuing strong operating performance, which has translated into improvements in its financial profile, Moody’s says. In particular, CMA CGM has maintained profitability levels, which are among the highest in its industry, with a core EBIT margin in 2014 at 5.8%.
CMA CGM achieved these results despite market conditions remaining challenging in the container shipping segment. While freight rates have remained low and volatile during 2014, in particular on the East-West routes, CMA CGM pursued its cost-containment efforts and further reduced its operating costs per twenty-foot equivalent unit (TEU) by around 4%, according to Moody’s.
While leverage (gross debt/EBITDA, including Moody’s adjustments and overdrafts) remains high for the B1 category, at 6.4x at year-end 2014, Moody’s positively notes the USD 2.2 billion cash balance, including overdrafts, that the company has maintained on its balance sheet as at 31 December 2014.
Moody’s expects that CMA CGM will maintain its strong performance during next 12-18 months, driven by sustained volume growth, the lower bunker price and the pursuit of its cost containment efforts. As a result, the company’s financial profile will improve further and be more comfortably positioned in the B1 category.