Press Release: PACCAR Inc, PACCAR of Canada Ltd. & PACCAR Financial Services Ltd.

Press Release: PACCAR Inc, PACCAR of Canada Ltd. & PACCAR Financial
Services Ltd.
Date of Release: Sep 17, 2002
Confirms at AA (low) & R-1 (middle)

Kam Hon, David Schroeder /  416-593-5577 ext.2243, ext.2232 /
<mailto:khon@dbrs.com> khon@dbrs.com

 corporate rating of PACCAR Inc ("PACCAR" or "the Company"), and the
commercial paper rating of PACCAR of Canada Inc. and PACCAR Financial
Services Ltd. are confirmed, all with a Stable trend.  The confirmation
reflects PACCAR's very strong balance sheet and acceptable profitability
despite a severe downturn in the heavy truck market in North America.

 

Very weak conditions in the North American heavy truck market led to a
sharp drop in the Company's profitability.  Even though net income
dropped sharply, PACCAR's performance was still well above its major
competitors where most reported losses.  Higher cost associated with the
new engine to meet new emission standards has motivated customers to
pull forward purchases and boosted demand up to the change over date on
or shortly after October 1, 2002.  Demand subsequent to the change over
is likely to be down, but the magnitude of the decline is uncertain.
Although overall demand for trucks is expected to be weak, PACCAR's
profit is expected to stay near current levels.  Ongoing benefits from
cost reduction efforts, the growing parts business, new trucks, and an
expanding dealer network in Europe should be able to offset the
deteriorating market conditions.  Nevertheless, the Company is well
positioned to benefit from the recovery in the market.  The balance
sheet (with financial services on an equity basis) remains very strong
and continues to be virtually debt free and all coverage ratios remain
strong despite weaker earnings.  Capital expenditures are expected to
stay near 2001 levels and are well below depreciation.  The Company
should have no problems funding capital spending internally and continue
to generate free cash flow.  The balance sheet is expected to remain
strong. 

 

 

Dominion Bond Rating Service Limited (DBRS) will publish a full report
shortly that will provide additional analytical detail on this rating
action. If you are interested in receiving this report, please contact
us at: info@dbrs.com.

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