Moody’s reviews Nemak for downgrade

Moody’s Investors Service said it placed the Ba1 senior unsecured and corporate family ratings of Nemak, SAB de CV under review for downgrade.

The review for downgrade was driven by the negative effect in the auto sector of the spread of the coronavirus outbreak, deteriorating global economic outlook and falling oil prices that are creating a severe and extensive credit shock across many sectors, regions and markets, the agency said.

The auto industry has been one of the sectors badly hurt by the shock given its sensitivity to supply chain disruptions as well as to consumer demand and sentiment, Moody’s said.

“Nemak has a leading position in the aluminum engine blocks and cylinder heads markets and is growing its structural and electric vehicle components business. Nonetheless its revenues are concentrated in the top three U.S. automakers, which together account for 60% of consolidated revenues. Furthermore, Nemak’s main markets (Western Europe and North America) that account for 91% of its revenue will also show a stronger contraction in 2020 from the effects of the coronavirus outbreak. We expect U.S. light vehicle sales to fall at least 15% in 2020,” said Moody’s in a press release.

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