Petronas says strong fundamentals remain despite Moody’s downgrade

Petronas’ after-tax profit grew by 9% year-on-year to RM14.2 billion in Q1 2019 on the back of 7% higher revenue of RM62 billion.

KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) has asserted that its strong fundamentals remain unchanged despite its credit ratings being downgraded by Moody’s Investors Service.

In a statement today, the national oil company said it has consistently maintained a conservative financial policy and healthy net cash balance that enables it to withstand volatility and shocks in the market.

“This is demonstrated by Petronas’ recent financial results in the first quarter (Q1) of 2019 and full year 2018, which was supported by our continuous efforts to increase operational efficiency and commercial excellence,” it said.

Petronas’ after-tax profit grew by 9% year-on-year to RM14.2 billion in Q1 2019 on the back of 7% higher revenue of RM62 billion.

Moody’s today announced it has downgraded Petronas’ domestic issuer and foreign currency senior unsecured ratings to A2 (stable) from A1 (negative).

The announcement was made subsequent to the publication of its updated cross-sector methodology, “Assessing the Impact of Sovereign Credit Quality on Other Ratings”, on June 20.

Under the new methodology, Petronas said, it is less likely for a company to be rated two notches above the sovereign.

Based on Moody’s updated assessment, Petronas no longer meets one of the characteristics required for a two-notch uplift above the Malaysian sovereign (A3 stable).

This is due to the company’s close credit linkages to the Malaysian government as its sole shareholder and that Moody’s could not rule out the possibility of future high dividend requests, it said.

Petronas said the ratings action was also influenced by the uncertainty over the negative impact to the company that might arise from the ongoing deliberation relating to the implementation of Malaysia Agreement 1963.

Petronas’ rating of A2 (stable) is now one notch above sovereign on the back of its strong financial metrics, conservative financial policies, solid liquidity profile and significant hydrocarbon reserves, it added.