S&P trims Valeo

S&P said it lowered its long-term issuer credit rating and unsecured issue-level rating on Valeo SA and its debt to BB+.

“Valeo’s earnings, cash flows, and leverage will deteriorate materially in 2020 from already weak levels in 2019. The demand for cars has plummeted in the first half of 2020 due to the extensive lockdowns imposed by governments to combat the spread of the Covid-19 pandemic,” S&P said in a press release.

The agency said it forecasts a 17%-18% decline in sales in 2020, reflecting its significant exposure to Europe and North America, which accounted for 67% of 2019 sales. “We estimate the sales decline will cause a drop in S&P Global Ratings-adjusted EBITDA margin to 5%-6%, down from 9.2% in 2019, resulting from the company’s high level of fixed costs,” the agency said.

S&P said it does see Valeo’s EBITDA margin recovering in 2021 as well as the company’s free operating cash flow recovering from negative €450 million-€550 million in 2020.

The outlook is stable.

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