Moody's affirms credit ratings for 4 Saudi companies

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Global rating agency Moody’s affirmed its ratings for Saudi Basic Industries Corp. (SABIC), stc Group, Saudi Electricity Co. (SEC) and Saudi Arabian Mining Co. (Maaden).

SABIC, stc and SEC were rated at A1 with “positive” outlooks, while Maaden was assigned a “Baa1” with a “stable” outlook.

Baseline Credit Assessment (BCA) was set at “A1” for stc, “A2” for SABIC, “Baa1” for SEC, and “Baa3” for Maaden, following Moody's updated government-related issuers (GRI) methodology on Jan.25.

SABIC's rating mirrors its global leadership in the petrochemicals and fertilizers market, competitive costs supported by economies of scale and competitive raw material access via long-term contracts with Saudi Aramco, robust credit metrics and excellent liquidity. The rating takes into account the cyclical nature of SABIC's sectors, industry challenges and asset concentration in Saudi Arabia.

For stc, Moody's highlighted its leading role in Saudi's telecom market with a market share of nearly 71%, proven strong credit metrics, healthy revenue and profitability growth and excellent liquidity. The growing competition in the telecom market, sizeable dividends and significant fluctuations in receivables weighing on free cash flow have been considered.

SEC's rating reflects low business risks, a dominant market position, a transparent and supportive regulatory framework established in 2021, and ongoing government support, including fuel and other subsidies. The agency considers stc’s regulatory compliance, increased debt service costs due to shareholder instrument, and growing debt load from investments incurred to meet electricity demand.

Maaden's assessment reflects its position as a multi-commodity producer with a strong position in the phosphate fertilizer market, low-cost and high-margin operations throughout the phosphate and aluminum value chains, high credit quality and partnerships with global facilities in each of its business sectors, strategic national importance, track record of financial deleveraging, prudent financial policies, and robust liquidity.

The assessment also includes Maaden's exposure to the cyclical and volatile prices of fertilizers and aluminum, its large expansionary investment program, weakened credit metrics against the backdrop of declining product prices, execution risks related to the company's production capacity expansion and mining exploration projects, and moderate operational concentration with reliance on several core assets and geographic concentration of assets in a single country.