CIMIC Group Ltd.

The stable outlook on CIMIC reflects that on Hochtief. The stable outlook on Germany-based construction and services group Hochtief reflects that on parent ACS, given our view that Hochtief is a core subsidiary of the ACS group, and its ratings are equalized with the parent's. We forecast ACS' adjusted FFO to debt to recover to more than 30% in 2019-2020, following a temporary drop in 2018, reflecting the benefit of dividends received from Abertis. We expect that ACS' operating performance will remain resilient in 2019-2020, reflecting supporting market conditions in the U.S. and Australia, and a continued focus on cash flow generation and disciplined working capital management. We forecast the group's adjusted EBITDA margins at about 8% in 2019-2020, underpinned

...Broad geographic diversity and favorable end-market exposure provide margin stability and mitigate sector cyclicality. CIMIC Group Ltd. benefits from its leading market position in Australia's infrastructure construction and contract mining sectors. Under several brand names, CIMIC has activity-focused businesses in construction; mining; mineral processing; operations and maintenance services; public-private partnerships (PPPs); and engineering. The group is exposed to diverse end-markets, including oil and gas, mining, as well as road and rail, water, defence, renewable energy, and telecommunications infrastructure. In our view, this geographic diversity helps to mitigate CIMIC's exposure to the operating risks, uneven project tenders, and inherent cyclicality of the construction industry. Increased receivables factoring outstanding reduces rating headroom.CIMIC's use of receivables factoring, that we treat as a debt-like obligation, significantly increased in 2018 to A$1.9 billion as...

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