S&P downgrades China Railway Construction outlook to negative

Published 27/06/2025, 14:44
© Reuters.

Investing.com -- S&P Global Ratings has revised its outlook on China Railway Construction Corp. Ltd. (CRCC) to negative from stable, while affirming its ’A-’ long-term issuer credit rating.

The rating action, announced on Friday, reflects S&P’s view that CRCC will face difficulties restoring its financial strength over the next two years amid challenging industry conditions.

S&P expects CRCC’s financial leverage to remain high over the next 12-24 months due to intense competition and tight funding conditions affecting certain project owners. This comes despite anticipated improvements in margin and cash flows from project mix optimization, cost cutting, and enhanced cash collection efforts.

Operating conditions in China’s engineering and construction sector are expected to remain challenging through 2026, primarily due to a prolonged property market downturn and tightened regulation on public-private-partnership projects. The sector’s new orders intake declined by 2% in the first quarter of 2025, following a 5% contraction in 2024.

Despite these headwinds, S&P believes CRCC will achieve modest business growth as state-owned E&C firms gain market share from private players. The company’s solid construction contracts backlog of RMB 4.3 trillion at the end of 2024 provides growth visibility, equivalent to 4.6 times its E&C segment revenue in 2024.

S&P forecasts CRCC’s revenue will grow by 1%-2% in 2025, with project execution expected to accelerate in the second half of the year amid increasing issuance of local government special purpose bonds.

The rating agency expects CRCC’s EBITDA margin to rise to 7.5%-8.1% in 2025-2026, up from 6.4% in 2024, supported by an improving project mix and stronger cost control measures. The company’s ratio of funds from operations (FFO) to debt is projected to improve to 10%-12% in 2025-2026, compared with 8.1% in 2024.

S&P could lower CRCC’s rating if its FFO-to-debt ratio remains below 12% or if EBITDA interest coverage falls close to 3x on a sustained basis. Conversely, the outlook could return to stable if the company achieves deleveraging with its FFO-to-debt ratio improving sustainably above 12%.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers
© 2007-2025 - Fusion Media Limited. All Rights Reserved.