Irish issuers more highly rated than peers elsewhere in EMEA

Corporate issuers in the Republic of Ireland are on average more highly rated than competitors elsewhere in Europe, the Middle East and Africa (EMEA), a new report shows.

Nearly two-thirds of Irish issuers are rated investment grade (BBB- or higher), according to S&P, which compiled the study.

S&P said a key reason for the high rating for Irish issuers is due to the fact that close to 80 per cent of them are publicly or state owned, whereas across EMEA, a majority are owned by private equity firms on the back of leveraged buyouts.

The ratings agency currently rates 36 nonfinancial corporate and infrastructure companies that are either incorporate or headquartered in the State. These issuers are from a number of industries, including healthcare, transportation, utilities, and oil and gas.

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“Despite a dip in 2017, partially because of a large business disposal, issuers have generally exhibited solid revenue growth over the last five years. This has been driven by both organic and acquisition growth,” the report authors said.

“However, despite revenue growth, which coincided with strong global and Irish economic growth rates, our adjusted ebitda margins for Irish issuers declined in 2018. Although some continued to expand their margins, the overall trend suggests that cost inflation, including input costs and personnel costs, has become more pronounced for many,” they added.

S&P said a trend of lower profitability, despite increasing revenues, would likely pressure ratings, raising questions about companies’ ability to manage their costs efficiently while sustaining revenue growth in the longer term.

The agency added it does not currently anticipate significant immediate rating actions on corporate and infrastructure issuers in the event of a no-deal Brexit.