U.S. building materials companies face 'tough slog' in 2012, but prospects are better for Latin American counterparts because of increased infrastructure spending: Standard & Poor's
February 7, 2012
– Standard & Poor's Ratings Services said today in an article that U.S.building materials companies are likely to have another tough year in 2012, while Latin American building materials producers will likely perform better because of increased spending on infrastructure. The report is titled "Credit Themes: A Tough Slog For U.S. Building Materials Companies Continues, While Latin American Peers Face Better Prospects."
In the U.S., the sector will remain stagnant thanks to tepid homebuilding and nonresidential construction activity, with an upturn unlikely until 2013 at the earliest, in our view. Thus, more than 25% of the approximately 40 U.S. companies we rate have negative rating outlooks or are on CreditWatch with negative implications.
In Latin America, by contrast, we expect building materials companies to fare relatively better, given increasing infrastructure spending by public and private entities in several countries.
"However, another U.S. recession, which doesn't seem likely in our view, or a significant hike in raw material costs could pose significant risks for these companies," said Standard & Poor's credit analyst Megan Johnston.
For the most part, we think companies in both regions will have sufficient liquidity to absorb rising raw material costs and weather whatever else comes their way--even another year of dismal demand in the U.S.
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