Centrient Holding B.V.

The stable outlook reflects our expectation of no liquidity issues and a gradual improvement in volumes in 2020 and 2021. We expect Centrient to retain its solid position as a leading provider of active pharmaceutical ingredients (APIs) for the semi-synthetic penicillin (SSP) and semi-synthetic cephalosporin (SSC) antibiotics market, which in our view should continue to expand, if more slowly than previously. The ratings also provide some flexibility for acquisitions, which we view as more likely, notably because sales growth prospects have eroded somewhat. We expect the group to maintain adjusted debt to EBITDA of 5.0x-5.5x in 2019-2020, with positive FOCF in 2020 and negative FOCF in 2021 due to higher capital expenditure (capex) needs. Any credit downside would be primarily

...COVID-19 has had a limited effect so far on Centrient Holding B.V. (Centrient), although S&P Global Ratings expects a destocking effect and some supply chain disruptions in second-half 2020. Following strong demand in first-quarter 2020, when patients stockpiled products in light of the pandemic, Centrient has experienced a stabilization of sales. We forecast a limited effect on the group's operations as it provides an essential service and the movement of medicine and medical goods is not restricted. Having said that, we do not rule out supply chain disruptions that could stretch working capital as a result of a second wave that leads to potential plant closures or sourcing constraints. After a challenging 2019, we expect Centrient to gradually improve its profitability with a forecast adjusted EBITDA margin of about 16% 2020 and 2021, compared with about 13% in 2019. We note that the group has been able to secure a strong position in Mexico following the re-establishment of the antibiotics...

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