S&P downgrades Eqstra

Standard & Poor's said it lowered the long-term South Africa national scale rating on Eqstra Holdings Ltd. to zaBBB+ from zaA-.

The agency also said it affirmed the company's short-term rating at zaA-2.

The downgrade reflects a view that South Africa's ongoing labor tensions in the mining sector and its lackluster economy have weakened Eqstra's business risk profile and financial performance, S&P said.

An industrial action in the South African mining sector in late 2013, which cost Eqstra an estimated ZAR 135 million, wiped out profits in the first half of 2014 at Eqstra's Contract Mining and Plant Rental division, which contributes about 46% of group revenues and 44% of operating assets, the agency said.

Overall, the group's operating profit declined by 13.5% at year-end 2013, S&P said.

This industrial action has not significantly altered Eqstra's financial profile, however, as the company benefits from good business-line diversification, the agency said.

A stronger second half of the year also is expected, S&P added, unless labor tensions or adverse weather conditions persist.

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