Jakarta. Moody's Investors Service, one of the major global credit rating agencies, has projected that the total earnings of Indonesian companies under the agency's watch would decline by at least 20 percent this year from last year, deteriorating their credit quality, as Covid-19 pandemic suppresses demand.
Companies in oil and gas, mining and property, and textile sectors were among the hardest hit by the pandemic, the agency said.
"We expect key financial metrics across our rated portfolio to weaken in 2020 before recovering gradually in 2021, although earnings will still be lower than in previous years," says Stephanie Cheong, a Moody's Analyst, said in a statement on Thursday.
"Refinancing risk is increasing because around 42 percent of rated high-yield US dollar bonds will mature by December 2022; the greatest risk will be faced by companies in the property and mining sectors," Cheong said.
The total earnings of companies rated by Moody's in the oil and gas, and mining and mining-services sectors would decline by 30-35 percent this year due to lower demand, the agency said. The companies earnings should recover next year, but "they are expected to remain 10–25 percent lower compared to 2019 earnings."
Weak consumer demand would also push down property companies' total earning by around 40 percent and textile companies by 20 percent. "The fall is steepest at around 50 percent for property companies with retail and hospitality operations, such as Pakuwon Jati," Moody's said.
Among palm oil companies, Moody's said "operational bottlenecks and governance challenges" would put Sawit Sumbermas Sarana remain under pressure. Sumber Mas got a B3 rating, or six levels below investment grade, from Moody's with a negative outlook.
Sumber Mas's peer Tunas Baru Lampung would also face "slowing domestic consumption of palm oil products," which would temper its earning. Moody's rated Tunas Baru at Ba3, or three levels below investment grade, with a negative outlook.
The credit quality of Indonesian corporates would also deteriorate amid the coronavirus pandemic. "The liquidity has weakened, with the Indonesia liquidity stress indicator (LSI) rising to a high of 53.6 percent in June 2020," Moody's said.