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S&P keeps Samsung's rating at AA-, says outlook is stable

All News 17:30 July 30, 2019

By Kim Eun-jung

SEOUL, July 30 (Yonhap) -- Standard & Poor's (S&P) said Tuesday it has maintained its credit rating on Samsung Electronics Co. at AA-, given its solid financial statement despite rising headwinds from the memory chip business and Japan's curbs on exports of some key materials to South Korea.

The global ratings agency said it expected the South Korean tech giant's profitability to be far lower than the record high levels of 2017 and 2018 due to lackluster memory chip sales, but it maintained its previous rating given Samsung's ample cash and strong market position.

"The stable outlook reflects our expectation that Samsung Electronics will continue to generate robust free operating cash flow and remain debt free on an adjusted basis over the next one to two years," S&P said in a report. "We also expect the company to maintain its disciplined financial policies on (capital expenditure) and shareholder distributions."

S&P estimated the operating profit for the world's largest memory chip and smartphone maker to fall nearly 60 percent on-year to about 24 trillion won (US$20.3 billion) in 2019 in the wake of tepid memory chip and display panel business.

The ratings agency also warned of the impact of Japan's recent export curbs targeting South Korea.

"Japan's restrictions on the export of several chemical materials to Korea could hamper Samsung Electronics's semiconductor and display panel production to some extent, if not resolved in a timely fashion," S&P said.

Although Samsung may find it hard to localize its sourcing of the materials in the near term, S&P said the rebound of memory chip prices in the past few weeks following Japan's July 4 imposition of the regulations was a "mitigating factor" for the South Korean firm.

The agency said the U.S. government's ban on Huawei could boost Samsung's 5G equipment and smartphone sales, while posing the risk of shrinking Samsung's chip and display sales to the Chinese tech giant.


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