S&P revises Posco outlook to negative

S&P said it revised its outlook on Posco Engineering & Construction Co. Ltd. to negative from stable and affirmed its BBB- long-term corporate credit rating.

"Our revision of the outlook on Posco E&C to negative mainly reflects our expectation that the company's operating performance will weaken over the next 12 months mainly due to uncertainties in its overseas engineering, procurement, and construction (EPC) business," S&P credit analyst JunHong Park said in a news release.

"We expect the company's profitability to decline in 2016 with an adjusted EBITDA margin of about 2.9%, compared with 3.3% in 2015 and 3.9% in 2014. We attribute this mainly to cost overruns in some of POSCO E&C's overseas plant EPC projects, including its Companhia Siderurgica do Pecem (CSP) steel plant project in Brazil."

The agency also expects Posco E&C's revenues from business with group affiliates to decline over the next two years as the Posco group continues to maintain low capital investments to improve the group's financial metrics.

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