From the onset of the COVID-19 pandemic in early 2020 until the end of 2022, supply chain disruptions led to over 200 S&P companies downgrading their ratings. They issued negative ratings in the CreditWatch category, which monitors companies for potential rating changes, or reviewed their assessments of the future. Most of these rating changes occurred in 2021 and 2022.
Data from rating agencies indicate that 30% of companies have been affected by deteriorating ratings, prospects, or credit assessments operated in the consumer products sector. Another 15% were companies from the equipment and machinery segment, and 10% were in the restaurant and retail chains. The automotive and high technology sectors had the same share, at 9% each, of companies for which S&P lowered their ratings.
Considering the circumstances from 2020 to 2021, including pandemic lockdowns and semiconductor shortages, it’s not surprising that companies in the modern technology, automotive, restaurant, and retail sectors found themselves on the list.
In summary, S&P explains that supply chain problems include increased transportation costs, impacting company margins, and rising prices that discourage consumers and negatively affect sales.
Although in 2023, the massive supply chain problems of the pandemic era are no longer as prevalent, mainly due to economic slowdown and reduced demand, this doesn’t mean there are no threats. S&P analysts provide an example of the conflict between Israel and Hamas. There’s a port in Ashdod near Gaza, and Israel is a significant exporter of pharmaceuticals, telecommunications, and aviation equipment. A prolonged conflict or its escalation may disrupt supplies from Israel to some extent.
S&P Global expects that in the medium term, there will be disruptions in supply chains due to new or existing geopolitical conflicts, protectionist policies of countries, increasingly frequent climate anomalies, cyberattacks, and strikes in some sectors.”
Photo: Jorge Franganillo / Flickr / CC BY 2.0 DEED
The above text is based on the original report authored by Michał Pakulniewicz, analyst for trans.iNFO’s Polish language service