Imerys SA

The stable outlook indicates that we expect Imerys' FFO to debt to remain at 20%-30% over the next two years, despite the recessionary macroeconomic environment caused by the COVID-19 pandemic. This is because of the company's strong financial commitment to an investment-grade rating. That said, there is little leeway at the 'BBB-' level to absorb further weakening in end-market demand. A deterioration of credit metrics, such that adjusted FFO to debt approached 20%, would likely cause us to lower the rating. This could occur if the market environment remained weak because of the pandemic, or Imerys was unsuccessful in implementing its contingency plans during the current recession, leading to weaker-than-expected operating performance. We could also lower the rating because working

...The COVID-19 pandemic has had an extraordinary impact on global economic activity and eroded demand for Imerys' products. S&P Global Ratings believes demand in Imerys' end markets is likely to fall further in 2020 because of the economic effects of COVID-19. The group operates globally, but generates around 70% of revenue from Europe and North America, which are expected to contract more than other regions, like Asia Pacific. Although some of the group's operations are in more stable areas, such as consumer goods (22% of revenue), most of Imerys' remaining operations are linked to GDP growth; this affects end markets such as construction (26%), iron and steel (13%), automotive (11%), and industrial (13%). Consequently, we anticipate that Imerys' revenue generation will take a hit from the decline in economic activity in 2020, but that revenue will pick up in 2021 as the general macroeconomic environment recovers....

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