Moody's cut its long-term credit rating by Stmicroelectronics from Baa2 to Baa3, with stable outlook. The agency explains that the decision is related to the fact that profitability and cash flow generation by the semiconductor company will recover more slowly than expected in the coming quarters after the phase of operating loss recorded this year.
The change also reflects the issues that Stm will have to resolve to improve profitability on some lower margin products and to increase the ability to generate profit and cash flow sustainably throughout the cycle after exiting the loss-making joint venture St- Ericsson.
The downgrade also comes after the company announced it was moving its 2015% operating margin target to mid-10. The stable outlook is mainly based on the fact that, according to Moody's, STM will maintain a financial policy based on balanced shareholder remuneration with respect to the creation of operating cash flow and on a limited amount of gross financial debt against an excellent liquidity position which gives the company plenty of time to recover in operating performance over the next 12-18 months.
In mid-afternoon, the Stm Stock Exchange stock moves around parity.
