Doosan Bobcat Inc.

We expect DBI's financial performance to weaken in 2020, substantially undermining the rating buffer it built up through debt reduction in the past several years. The company's reported debt went up to near US$1 billion in 2020 following its preemptive US$300 million debt issuance to help address COVID-19 disruptions. We now expect DBI's leverage--as measured by its debt-to-EBITDA ratio--to increase to 2.5x-3.5x in 2020, from 1.6x in 2019. DI has reduced its debt to Korean won (KRW) 4.0 trillion in 2019 from more than KRW6.0 trillion in 2015. However, its heavy reliance on short-term debt (more than half of total debt) and ongoing refinancing needs expose the group to volatility in the funding market, which has become increasingly risk-averse. Nonetheless,

...Weaker operating performance and increasing debt will weaken Doosan Bobcat's Inc.'s (DBI) credit metrics in 2020. We estimate the company's sales will decline by 5%-15% this year, before recovering in 2021, due to slower residential construction activity and delayed spending by customers. We forecast residential investments in the U.S., DBI's biggest market, will fall by about 6% as a result of recession caused by the COVID-19 pandemic. With DBI's high operating leverage, a fall in sales will compress margins and cash flows. In our base case, we estimate the company's EBITDA margin will drop to 8%-11% in 2020, compared with about 13% in 2019. We expect DBI's financial performance to weaken in 2020, substantially undermining the rating buffer it built up through debt reduction in the past several years. The company's reported debt went up to near US$1 billion in 2020 following its preemptive US$300 million debt issuance to help address COVID-19 disruptions. We now expect DBI's leverage--as...

Full Report