Molex Electronic Technologies LLC

This report does not constitute a rating action. Overview Key strengths Key risks Good position in the highly competitive and fragmented global connector industry. Lower profitability than major industry peers because of greater research and development and manufacturing spending. Broad end-market exposure and diverse customer base. Acquisitive growth strategy. Continued operational and financial support from parent Koch Industries Inc. Cyclical demand characteristics. Good free operating cash flow generation. Electronic Technologies LLC's credit metrics are very strong for the 'BBB' rating, but we are not convinced they will remain at these levels. Molex's balance sheet continues to strengthen, and thanks to the combination of debt repayment, earnings growth, and muted acquisition activity, its adjusted debt to EBITDA as of Sept. 30,

...Molex Electronic Technologies LLC's credit metrics are very strong for the '###' rating, but we are not convinced they will remain at these levels. Molex's balance sheet continues to strengthen, and thanks to the combination of debt repayment, earnings growth, and muted acquisition activity, its adjusted debt to EBITDA as of Sept. 30, 2021, was about 0.9x, significantly lower than our expectation for the rating of 2x-3x. That said, we do not believe the company is adopting a more conservative financial policy, and we think the company would likely use this cushion to help fund future acquisitions or distributions to parent Koch Industries Inc. if activity remains muted because of valuations. A robust demand environment and early benefits of transformation initiatives have enabled Molex to deliver strong operating performance over the first nine months of 2021. Under these favorable conditions, Molex accelerated revenue growth across its four reporting units and in all regions. Specifically,...

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