S&P downgrades Dana

S&P said it lowered its ratings for Dana Inc. and its unsecured debt to BB- from BB. The unsecured debt’s 4 recovery rating is unchanged.

“The downgrade reflects our expectation for Dana's credit metrics to deteriorate significantly due to operational constraints and higher electric vehicle (EV) transition reinvestment needs. We expect limited earnings growth and greater capex, resulting in limited free cash flow and substantially weaker credit metrics in 2023. The company's S&P Global Ratings-adjusted EBITDA margin declined to 7.3% in 2022 from 9.2% in 2021 due to inflationary cost pressures, production volatility, and increased EV investment lowering EBITDA generation,” the agency said in a press release.

However, S&P noted, “Operating leverage should improve as volumes recover. Furthermore, as some of the company's light vehicle programs are renewed, such as the Ford Super Duty, renegotiated pricing should kick in and drive some margin uplift as production volumes ramp up. We expect adjusted EBITDA margins to expand to about 7.5% in 2023 from 7.3% in 2022.”

The outlook is stable.

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