S&P downgrades SingPost’s credit rating to ‘BBB-’ on downscaling, subdued operating conditions

[SINGAPORE] S&P Global Ratings on Friday (Jul 25) downgraded its long-term issuer credit rating on Singapore Post (SingPost) to “BBB-” from “BBB”, as it has scaled down with the sale of its Australian logistics and freight forwarding businesses.

Its core business also continues to face subdued operating conditions.

But S&P added: “The stable outlook reflects our expectation that SingPost will approach investments prudently, and manage the structural decline in the postal industry.”

A “BBB” rating by S&P means that the company has adequate capacity to meet its financial commitments, but is more subject to adverse economic conditions. “BBB-” is the lowest grade that an investment-grade company can receive, and is just above a junk bond rating.

The credit rating agency also lowered its issue rating on the Singapore dollar S$250 million subordinated perpetual securities that the company guarantees to “BB” from “BB+”.

The latest downgrades came two years after S&P downgraded SingPost’s long-term issuer credit rating to “BBB” from “BBB+”, on potentially longer-than-expected weakness in its post and parcel segment.

In its latest report, S&P said it sees the sale of SingPost’s Australian logistics business Freight Management Holdings in March 2025 to be transformative, “representing a significant pivot from the company’s earlier strategy to establish Australia as a second home base”. 

The Australia business accounted for about 50 per cent of operating profits from continuing and discontinued operations in the 2025 fiscal year ended Mar 31, it noted.

S&P also flagged the sale of SingPost’s freight-forwarding business conducted through Famous Holdings and Rotterdam Harbour Holding earlier this week, after identifying it as non-core.

“The loss of a key earnings pillar shifts the focus back to the postal and logistics business, which is facing structural and operating issues,” the agency said. “It is also operating at significantly reduced scale and diversity.”

The core business faces weak profitability amid persistent structural decline, high fixed operating costs, and rising competition in a highly fragmented market, it said.

It added that the operating margin for SingPost’s postal and logistics as well as international businesses was about 1 per cent in the 2025 fiscal year, against the post and parcel segment’s 15 per cent in the 2020 fiscal year.

The agency believes that SingPost’s two divestments will have bolstered its cash position by about S$750 million. It is likely to deleverage, to manage its balance sheet, it said. It will also pay out a special dividend of S$202.5 million in the 2026 fiscal year.

S&P believes that SingPost’s leverage could increase from a net cash position through investment cycles. It said: “The company has a track record of debt-fuelled expansion.”

The credit rating agency has removed its ratings on the company from CreditWatch, where it had placed SingPost with negative implications on Dec 5 last year.

Clouded but stable outlook

S&P noted that SingPost is undergoing management changes, and said it will wait for clarity on its strategy.

The frequent management turnover and strategy changes cloud the operating earnings outlook, it said, adding that the “strategic backtracking” on the sale of the entire Australia business undermines “the consistency and execution” of its stated strategy, to diversify away from the domestic business which is facing structural decline.

“In our view, SingPost has to demonstrate its ability to reposition itself in the postal and logistics business under the new management team,” it said, pointing to the constant and ongoing changes to the board and senior management. “The CEO position has yet to be filled.”

But S&P also noted that SingPost is in talks with the government to address the financial sustainability of postal services and the post office network.

The agency said that its stable rating outlook on SingPost reflects its belief that the company will prudently pursue investments and manage its postal businesses’ structural decline sustainably.

But it may downgrade the rating if it expects SingPost’s business competitiveness to further weaken, such as in the case where it cannot stop the decline of its postal and logistics core business, or earnings diversity reduces further.

A downgrade could also occur if its earnings deteriorate due to competitive pressures, or it chooses an aggressive growth strategy that causes debt to increase materially more than expected.

“A ratio of debt-to-Ebitda (earnings before interest, taxes, depreciation and amortisation) of above 2.5x will reflect such deterioration,” it said.

On the other hand, an upgrade could be due if SingPost “demonstrates a sustained track record of improving profitability across its core postal and logistics business, while maintaining earnings diversity and a conservative balance sheet position”.

SingPost shares closed at S$0.63, up S$0.005 or 0.8 per cent higher on Friday, shortly after the report was released.