Engineered Machinery Holdings Inc.

We expect to see a modest pickup in demand in early 2021 as customers resume large capital projects within the packaging and material handling segments. The stable outlook reflects our view that Duravant will experience some topline decline in 2020 given the difficult macroenvironment, leading to leverage in the 8x area by the end of 2020. We expect the company to maintain healthy free operating cash flow (FOCF) generation and for EBITDA margins to remain over 20% during this period. We could lower our ratings if Duravant's liquidity position weakens significantly. This could occur if reduced demand for the company's key products, loss of key customers, and other operational challenges prevent Duravant from generating FOCF. This would likely lead the

...We expect ongoing soft demand throughout 2020. Engineered Machinery Holdings Inc. continued facing headwinds in the first half of the year. The uncertain macroeconomic backdrop has caused customers to cut capital expenditures (capex), resulting in weaker demand for the company's packaging and material handling solutions, particularly for quick service restaurant (QSR)-facing equipment. These segment results suffered from tough comparisons versus the same period last year along with order deferrals. The company's food processing segment, however, performed well due to increased demand across product categories, particularly compared with last year's results. We expect sales in this segment to remain somewhat positive for the rest of 2020. The company also reported increased backlog coming out of the second quarter, indicating the possibility of a stronger second half of the year as the macroeconomic backdrop improves. We expect leverage to remain high but manageable over the next 12 months....

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