Bangkok--23 Nov--Standard & Poor's
As the U.S. economy struggles to recover from the recent recession and Americans remain wary of spending on anything but the most essential items, revenues for Standard & Poor's Ratings Services' speculative-grade rated industrial companies have only recently recovered to levels last seen in early 2008, and many sectors that depend heavily on consumer discretionary spending have yet to rebound fully.
According to a report released yesterday by Standard & Poor's, titled "U.S. Speculative-Grade Borrowers Face A Rough Road To Revenue Growth In A Still Sputtering Economy," headwinds for these companies remain strong, given that speculative-grade borrowers generally suffered bigger percentage revenue declines than their investment-grade competitors during the downturn--and have recovered more slowly since.
With revenue growth hard to come by, speculative-grade companies have tried relentlessly to cut costs and reduce the volatility of their cash flows. Aggregate EBITDA grew 12% in the first three months of 2011 over 2008, as opposed to aggregate revenues, which grew only about 2% during the same period. However, profit and cash flow growth via cost cutting has limitations, and has visibly slowed over the past few quarters, indicating that companies have more or less exhausted their ability to optimize operations.
"Future EBITDA growth will likely depend on companies' ability to improve their revenue growth," noted Standard & Poor's credit analyst Vishal Merani.
The report is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to
[email protected]. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.
Media Contact:
Mimi Barker, New York (1) 212-438-5054,
[email protected]
Analyst Contacts:
Vishal Merani, New York (1) 212-438-2679