CIMIC Group Ltd.

The stable outlook on CIMIC reflects that on the ultimate parent ACS, given our view that CIMIC and its immediate parent Hochtief are core subsidiaries of the ACS group, and its ratings and outlook are equalized with the ultimate parent's. The stable outlook on ACS and its core subsidiary Hochtief reflects our view that the ACS group's adjusted funds from operations (FFO) to debt should stand comfortably above 30% in 2021-2022, after a temporary drop in 2020. In our view, the group's solid order backlog and still positive prospects for civil infrastructure construction should support ACS' operating performance. ACS will likely continue to focus on cash flow generation, alongside disciplined working capital management. We forecast the group's adjusted EBITDA margins

...CIMIC Group Ltd.'s significant geographic diversity, wide end-market exposure, and a solid order backlog provide support to navigate the recessionary economic environment following COVID-19. We expect the management to take decisive actions to strengthen the company's financial position and maintain a strong liquidity position, including reducing costs and discretionary expenditure, strictly managing cash flow and working capital, and reducing nonessential capital expenditure. We expect CIMIC's financial policy to remain supportive of the rating and SACP, including the company maintaining a debt-to-EBITDA ratio below 2x over the next two years. Furthermore, CIMIC's liquidity position remains strong, bolstered by the company's decision to suspend interim dividends. The weaker credit quality of parent Actividades de Construccion y Servicios SA (ACS) continues to constrain the rating. Despite CIMIC's SACP of '###+', the issuer credit rating is constrained by our assessment that CIMIC remains...

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