Korea Ratings, a leading local credit appraiser, said Friday that it has downgraded its credit ratings for local shipbuilders like Hyundai Heavy Industries, but has retained a stable outlook.

The ratings agency lowered its long-term credit rating for Hyundai Heavy Industries, the world’s largest shipbuilder, by one notch from its second-highest investment grade of AA+ to AA, with a stable outlook.

A huge net loss and a downtrend in profits and cash flow were the main reasons for the downgrade, it said.

The company posted 616.6 billion won ($593.6 million) in net losses in the second quarter, with a record 1.11 trillion won in operating losses.

However, its stable outlook reflected expectations that the global No. 1 shipbuilder will retain its current financial stability in the future based on its prominent position in the industry, diversified business portfolio and superior financial flexibility, Korea Ratings said.

Financial flexibility is a firm’s ability to raise cash when needed. (Yonhap)