DBRS confirmed Japanese equipment maker Komatsu Ltd.'s issuer rating at A (low) and revised the trend to positive from stable, citing a faster-than-expected recovery in the company's financial profile following the acquisition of Komatsu Mining Corp.
Komatsu's performance for fiscal year 2018 exceeded DBRS' forecast, with the company's key credit metrics recovering faster to the low end of the A range. DBRS had predicted Komatsu to remain at the high end of the BBB rating range after its partly debt-financed acquisition of Komatsu Mining Corp. weakened its financial profile. A robust construction market in North America, China and South Asia contributed to Komatsu's strong performance.
DBRS said the Komatsu Mining Corp. acquisition will improve Komatsu's competitiveness and solidify the company's business profile in the middle of the A range.
The rating agency said it would consider upgrading the issuer rating by one notch if Komatsu can further strengthen and stabilize its financial profile. However, it would consider changing the trend back to stable if Komatsu cannot sustain its financial recovery.