Bangkok--3 Jul--Moody's Investors Service Moody's Investors Service has a stable rating outlook for Asia Pacific's retailing and consumer-product sectors over the next 12-18 months despite rising economic uncertainty in the region and worldwide. In a new report, Moody's says that slowing global growth poses few negative rating implications for Asian issuers because they sell primarily into domestic and regional consumer markets that remain strong relative to those in the U.S. and Europe. However, the report also notes that Australia's economy may grow more slowly than originally forecast due to a variety of factors, which may have longer-term implications for some of its rated issuers. One of the report's authors, Ian Lewis, a Moody's vice president and senior analyst, says, "As policymakers in the region tighten monetary policy, the resulting slower growth rates and higher interest charges could hurt issuers' revenues, cash flows, and margins." He adds, "Most of the rated companies derive at least some of their earnings from non-discretionary food and beverage items, which provide a measure of protection in a weakening economy. Nevertheless, consumers may switch to lower-priced products and away from, for example, premium beverages that have driven substantial margin growth in recent years." A second author, Renee Lam, a Moody's vice president and senior analyst, expects issuers to maintain financial discipline in an uncertain credit and macro environment. She says, "Moody's ratings already factor in the companies' growth strategies. Going forward, these strategies will tend to focus more on diversification and organic growth than the large acquisitions that strained the finances of some issuers in the recent past." However, Lam adds, "Continued high fuel, packaging, and input costs—from barley for brewing beer to polyethylene terephthalate for soft-drink bottles—are squeezing margins for issuers unable to pass on higher costs to retailers, who generally enjoy greater pricing power." Lam and Lewis note that regulatory risks remain manageable, but have potential, negative implications for issuers in Thailand and Australia, which are in the midst of anti-alcohol campaigns, and for China Fisheries Group, which has a license up for renewal. Lam says, "Thailand Beverage also faces higher excise taxes," while Lewis adds, "The pricing behavior of Wesfarmers and Woolworth's is under increased scrutiny from Australia's competition and consumer commission, the "ACCC"." According to the authors' research, the rated issuers generally have good intrinsic liquidity and face no problems with overly restrictive borrowing covenants. However, several Australian issuers have modest, but manageable, refinancing needs in the next twelve months. The new report, entitled "Asia-Pacific Consumer Products and Retail Sectors: Stable Outlook Amid Rising Economic Uncertainty", is available at www.moodys.com. Sydney Ian Lewis Vice President - Senior Analyst Corporate Finance Group Moody's Investors Service Pty Ltd JOURNALISTS: (612) 9270-8102 SUBSCRIBERS: (612) 9270-8100 Sydney Brian Cahill Managing Director Corporate Finance Group Moody's Investors Service Pty Ltd JOURNALISTS: (612) 9270-8102 SUBSCRIBERS: (612) 9270-8100