Nortel S&P Outlook Revised To Neg; Afmd
06 Jun 14:51
Following is a press release from Standard & Poor's:
TORONTO (Standard & Poor's CreditWire) June 6, 2001--Standard & Poor's today
revised its outlook on Nortel Networks Ltd. (NT) to negative from stable. At
the same time, all outstanding ratings on the company and its subsidiaries,
Nortel Networks Inc. and Nortel Networks Capital Corp., were affirmed,
including the single-'A' long-term and 'A-1' short-term corporate credit
ratings on Nortel.
The outlook revision reflects the reduction in global demand for
telecommunication products, which Standard & Poor's anticipates will be more
severe than expected, resulting in slower overall market growth and demand for
Nortel's products. The company has implemented a number of cost-reduction and
related measures that Standard & Poor's expects will return operations to a
break-even basis in the second half of the year.
The ratings reflect Nortel's strong market position as a leading
telecommunications equipment supplier and the world leader in the provision of
high-speed optical equipment with a 48% market share. Ratings also consider the
degree of competition in the industry; Nortel's broad geographic coverage and
product portfolio diversification; and the extent of the ongoing investment
required to fund Nortel's growth, which includes the provision of customer
financing.
During 2000, the company's revenue grew by 42% to US$30.3 billion, with
EBITDA increasing to about US$4.0 billion. Key to the rapid growth in 2000 was
the growth in optical internet systems and related products, and mobility
products. At the same time, Nortel broadened its geographic coverage to the
extent that non-North American markets accounted for 35% of revenues in 2000,
and Standard & Poor's expects this coverage to increase in the future.
During the first quarter of 2001, revenues were maintained at levels close to
those in the first quarter of 2000, butthe composition changed substantially,
with optical intercity products declining by 30%. This decline was offset by a
38% increase in wireless products. Revenues from the U.S. also declined
significantly. In addition, the company recorded an operating loss of US$385
million and an earnings loss of US$2.6 billion at March 31, 2001. Nortel's debt
level increased to US$5.0 billion on a lease-adjusted basis, with total debt to
capital at about 14%.
Given the difficult industry conditions, the company has announced a series
of actions designed to align costs, to focus on customer profitability, and to
deemphasize noncore, low-growth areas. The actions include a significant
employee reduction, a reduction from 2000 levels in capital expenditures for
2001, and improvements in working capital management. Vendor financing
commitments at March 31, 2001, were US$2.8 billion, down from US$4.1 billion at
the end of 2000.
OUTLOOK: NEGATIVE
Standard & Poor's expects the decline in telecommunication spending is likely
to last at least through 2001 and will broaden beyond North America. In this
context, Standard & Poor's expects Nortel's revenues to decline by about 15%
below the 2000 level of US$30.3 billion and the cost-reduction actions to
return the company to a break-even EBITDA level in the second half of the year.
Should revenues decline significantly below these levels or should other
financial metrics erode substantially, ratings could be lowered, Standard &
Poor's said.
(END) DOW JONES NEWS 06-06-01
02:51 PM |
