ICA Outlook Seen as Negative With S&P Cutting Debt Rating

Empresas ICA SAB (ICA*) got a second downgrade in less than a week as Standard & Poor’s cut the debt rating on Mexico’s largest construction company and said the outlook was negative as sales slow.

S&P lowered its credit rating on Mexico City-based ICA today one step to B+, or four levels below investment grade. That followed a May 17 reduction by Moody’s Investors Service to B2, or five steps below investment quality.

Delays in executing existing contracts are hurting ICA’s financial performance, and construction could remain “sluggish” in 2013’s second half, Luis Martinez, an S&P analyst, said in a report. President Enrique Pena Nieto unveiled his five-year development plan yesterday without giving details for public-works spending.

“The negative outlook reflects the uncertainty regarding ICA’s backlog execution recovery during the next six months, which in our view could further limit the company’s ability to improve leverage metrics,” wrote Martinez, who is based in Mexico City.

Increased debt at the corporate level is limiting ICA’s financial flexibility, while higher short-term maturities are crimping liquidity, Martinez wrote.

ICA’s shares have fallen 16 percent in the last three days for the largest such decline since August 2011. The stock dropped 7.9 percent to 28.02 pesos at the close in Mexico City.

Sales may rise 5 percent in 2013, according to S&P, short of ICA’s forecast in April for 9 percent to 12 percent. While a plan to sell stock in airport operator Grupo Aeroportuario del Centro Norte SAB may raise about $400 million, that may not be enough to repay all debt due within a year, S&P said.

First-quarter revenue declined 27 percent to 6.91 billion pesos ($560.2 million), including a 41 percent drop in construction, ICA said April 26. ICA’s backlog of construction projects fell 7 percent from Dec. 31 to 30.3 billion pesos.

Total debt climbed 14 percent to 54.2 billion pesos as obligations due within a year increased 17 percent to 12.4 billion pesos.

To contact the reporter on this story: Brendan Case in Mexico City at bcase4@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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