[ET Net News Agency, 12 July 2019] Moody's Investors Service said that Johnson Electric
Holdings Limited's (00179) profit warning for its 1H 2020 results for the fiscal year
ending 30 September (FY2020) is credit negative, but has no immediate impact on the
company's Baa1 issuer or senior unsecured ratings.
The ratings outlook remains stable.
"Despite the projected decline in earnings and profitability, Johnson Electric's low
debt leverage and solid liquidity will provide the company with sufficient buffer against
market volatility," said Stephanie Lau, a Moody's Vice President and Senior Analyst.
On 10 July, Johnson Electric announced that its sales for the first quarter ended 30
June 2019 recorded a 12% year-on-year decline to US$767 million. Excluding currency
movements, sales fell by 9% to US$794 million. Based on the prevailing sales trends and
the assessed 1Q 2020 management financial statements, the company expects an attributable
profit for 1Q 2020 to record a substantial year-on-year decline.
In this regard and given the persistent weakness in global auto sales and market
volatility against the backdrop of US-China trade tensions, Moody's expects Johnson
Electric's annual sales to decline by about 10% year-on-year to around US$2.9-US$3.0
billion in FY2020, and adjusted EBITA margin to soften to 9% from to 10% in FY2019.
Nonetheless, Johnson Electric's adjusted debt/EBITDA should remain robust at around
1.7x-1.8x in FY2020, only slightly higher than the 1.6x in FY2019. Moody's assessment is
based on adjusted debt falling to around US$720 million in FY2020 from US$815 million in
FY2019, largely reflectingthe repurchase and cancellation of all outstanding convertible
bonds after their redemption in April 2019.
Johnson Electric's liquidity position remains solid, underpinned by an unrestricted cash
balance of US$340 million at 31 March 2019. This cash source, in addition to annual
operating cash flow of US$350-US$400 million, are sufficient to cover - for the following
12 months - around US$211 million in short-term debt outstanding and committed capex of
around US$340 million. (KL)