Arvos LuxCo S.a.r.l.

The negative outlook reflects our view that the group's profitability, cash flows, and liquidity might deteriorate more than anticipated amid the uncertain economy and execution risk linked to its planned restructuring and asset sales. Therefore, we view specific default scenarios in the next 12 months as possible. We could lower the rating if the group's operating performance and profitability do not recover as expected, leading to even lower cash generation and a liquidity crisis. In addition, inability to comply with the financial covenants, would likely lead us to downgrade Arvos. The risk of a default or debt restructuring is becoming more acute following weaker operating performance and cash burn. We view upside as unlikely because of the low visibility of

...We expect Arvos LuxCo S.a.r.l.'s business to expand over the next 12 months, but note that difficult market conditions could create headwinds, although we do not yet see any significant negative impact from the current crises. In FY2022 (ended March 31, 2022), Arvos' business slowly recovered from the pandemic, with a 2.2% increase in revenue and a 250 basis point increase in the S&P Global Ratings-adjusted EBITDA margin to 10.9%. Order intake increased to 288 million in FY2022 from 225 million in FY2021 and remained high at about 89 million in the first three months of FY2023, representing a 74% year-on-year increase. Accordingly, we anticipate an acceleration in sales growth with revenue increasing 14.0%¡19.0% in fiscal 2023 and 7.0%¡12.0% in fiscal 2024. Besides increasing demand, revenue growth is supported by price increases amid inflation. Growth will come from a significant expansion in the Schmidtsche Schack (SCS) division, also benefiting from a catch-up effect from the pandemic....

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