Moody’s revised on August 3 its outlook on Samsung Electronics from stable to positive, is signaling that it can adjust its credit rating for the company upward in 12 years.
On August 3, Moody’s revised its outlook on Samsung Electronics from stable to positive, signaling that it can adjust its credit rating for the company upward in 12 years. On July 21, S&P raised its credit rating for Samsung Electronics from A+ to AA- in four years.
Fitch, in the meantime, has maintained A+ for 11 years. Five years ago, it expressed a negative opinion on the ground that the semiconductor and mobile phone industries were highly volatile, Samsung Electronics required large capital expenditures in spite of its abundant cash, and its operating profit-to-sales ratio was merely 8.6% on average in 2007 to 2011 whereas those of Microsoft, Oracle and IBM exceeded 20%.
Samsung Electronics’ operating profit almost doubled from 15 trillion won to 29 trillion won in 2012. Then, a large number of global institutional investors called for the credit rating agency to reconsider the rating. In response, Fitch said in June 2013 that Samsung Electronics had yet to show its aspect as a true innovator. It maintained the same rating in June last year.
More recently, Moody’s predicted that the operating profit-to-sale ratio of Samsung Electronics would rise from 14% to 21% between last year and this year based on its higher-than-before technical barrier and its capital expenditure-to-operating cash flow ratio lowered from 85% to 60%. Regarding its all-time high operating profit of over 14 trillion won and operating profit ratio of as high as 23% that were recorded in the second quarter of this year, Moody’s mentioned that Samsung Electronics’ leadership is getting stronger in terms of technological strength and its technological innovation is overcoming the limitations of the industries the company is doing business in.