Moody's downgrades Motherson Sumi's outlook to negative

New Delhi, November 4 () The Moody's Investors Service rating firm on Monday lowered the rating outlook of the car parts manufacturer Motherson Sumi Systems to negative from stable, mainly due to the company's weak performance.

However, it has maintained the company's rating at Baa3.

The negative outlook primarily reflects the weak performance of Motherson's new operations, as well as the slowdown in global car sales, and our concerns about timely recovery, which in turn weighs on the company's consolidated profits and the generation of cash flow, said a vice president and senior credit officer at Moody's. Kaustubh Chaubal said in a statement.

The company's European operations accounted for more than 40 percent of the company's consolidated revenues in the fiscal year ending March 2019.

Weak car demand, particularly in the company's European operations, and the delay in intensifying its green expansions have affected the company's credit profile, he said.

The rating agency expects a 3.8% decline in global sales of light vehicles in 2019 and another 0.9% decline in 2020.

The negative outlook of the Moody's sector for auto parts producers incorporates the expectation of a decrease in profitability of 100-150 basis points in 2019, without a significant recovery in 2020, he added. The negative outlook on Motherson's Baa3 rating reflects these challenging industry conditions and the likelihood that the company's credit metrics will remain close to its rebate triggers, the rating agency said. MSS MKJ

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