Possible downgrade weighs on Acsa plans

The country ’ s airports operator, Airports Company SA (Acsa), which is hoping to raise R4.2bn in the coming two years, has warned of the risk a sovereign ratings downgrade from Moody ’ s Investors Service poses to its efforts to access affordable funding.

A sovereign credit ratings downgrade to junk has been hanging over SA for at least two years as a weak economy, financial crises at a cohort of state-owned companies, including Eskom, and rising government debt expose the country ’ s fiscal constraints.

INVESTMENT DRIVE

However, Moody ’ s, the only major credit ratings agency that still ranks SA bonds as “investment grade ”, has said it is unlikely to downgrade SA in the next 12 to 18 months.

Nevertheless, the outcome is a key risk for Acsa in the coming two financial years, said acting CFO Lindani Mukhudwani, given that Acsa is set to embark

on a R14.6bn investment drive over this period. At least R4.2bn will have to be raised on capital markets, she told Business Day after the release of the latest financial results on Tuesday.

The investments include the development of the western precinct at OR Tambo International Airport and upgrades of the international and domestic terminals at Cape Town International.

The company ’ s rating, like that of the SA government, is one notch above junk status at Baa3 with a stable outlook from Moody ’ s. It is constrained by the sovereign rating, as the agency would not rate Acsa higher than the government.

Acsa, which is one of the few profitable state-owned companies, has like many SA companies seen its finances take strain because of a weak economy, which is not expected to grow beyond 1% this year.

In its results, Acsa revealed steep declines in profits for the year, hit by muted revenue and increased costs, particularly employee and security increases. Although the group, which is Africa ’ s largest airport operator, managed to grow revenues 5.6% to R7.1bn, earnings before interest, taxation, depreciation and amortisation, or core profit, shrank 4.6% to R2.86bn. Net profit for the year declined 58.9% to R227m.

Acsa had felt the “structural impacts ” of financial difficulties at state-owned airlines SAA and SA Express, said acting CEO Bongiwe Mbomvu, but she stressed that SAA does not owe Acsa any money. SA Express, which was briefly grounded by Acsa in August after failing to service its reported R70m debt, is up to date with its payments.

R4.2bn

the amount Acsa will have to raise on capital markets