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Moody’s rates Eramet, notes Ba2
Moody’s Investors Service said it assigned a first-time Ba2 corporate family rating and Ba2-PD probability of default rating to Eramet SA. Concurrently, Moody's assigned Ba2 instrument ratings to the group's €500 million (€442.1 million outstanding) of and €300 million of senior unsecured notes due in 2024 and 2025, respectively. The outlook is stable.
In explaining the rating, Moody’s noted Eramet’s strong position in the global manganese and ferronickel markets, healthy credit metrics in its rating group, such as high Moody's-adjusted EBIT margin of 30.7% and a modest Moody's-adjusted debt/EBITDA of 1.2x in 2022 and the French government’s 27% stake among other factors.
However, the agency also noted Eramet’s revenue comes from manganese and nickel its limited size and scale compared with that of global peers rated by Moody's, its exposure to politically risky mining jurisdictions, such as New Caledonia, Gabon, Senegal, Argentina and Cameroon, although this is somewhat offset because a French holding company invoices and collects the cash proceeds for the majority of group companies and the group's exposure to volatile commodity cycles, prices and demand among other concerns.
“The stable outlook reflects Moody's expectation that Eramet's currently strong credit metrics will weaken, but at least partly remain within the defined ranges for a Ba2 rating over the next two years. While expected considerable growth investments in existing and new metals (e.g., nickel and lithium) will likely prompt negative FCF in 2023 and 2024, Moody's recognizes the group's strengthening position in these materials that face expected growing demand over the next two to three years and its good liquidity profile,” the agency said in a statement.
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