Imerys SA

The stable outlook on Imerys indicates that we expect the company's FFO to debt to remain at 20%-30% over the next two years, factoring in a rebound in economic activities and strong financial policy commitment to an investment grade rating. We believe there is sufficient leeway at the 'BBB-' level to absorb market volatility and to pursue investments, including potential further bolt-on acquisitions. We could lower the rating if there was a deterioration of credit metrics, such that Imerys' adjusted FFO to debt approached 20%. This could occur if the group's profits declined markedly, owing to potential deep and protracted weakening in cyclical industries--notably steel, oil, construction, and automotive--or if Imerys could not successfully navigate higher input costs, leading to

...We expect the demand for Imerys' products to gradually improve as economic activity rebounds. Imerys generated about 75% of its revenue in 2020 from end markets that were significantly affected by the pandemic including construction, industry, iron and steel, paper, and automotive. Therefore, the demand for Imerys' products fell, particularly in the first-half of 2020, with sales volumes declining by 25% year-on-year in second-quarter 2020 and 11.8% year-on-year in third-quarter 2020. We forecast economic activity will recover in 2021 (GDP growth for Europe 4.6% from -5.3% in 2020; North America 6.7% from -3.7%, Asia Pacific 6.7% from -1.4%) with the demand for Imerys' products improving. Organic sales were already up by around 17% in the first half of 2021, coming from volume growth and price mix. We anticipate revenue to grow by 10%-12% in fiscal year (FY) ending Dec. 31, 2021, and around 3% in FY2022....

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