PostNL N.V.

The stable outlook reflects our view that PostNL will improve and maintain its weighted-average adjusted FFO-to-debt at more than 45%, thanks to its ongoing and effective cost-saving initiatives, the ability to improve its profitability, effective working capital management limiting cash outlays, and a consistent dividend policy. We could lower the rating if the Sandd acquisition does not result in better profitability in the mail segment sufficient to compensate for higher adjusted net debt after the acquisition. We could also lower the rating if PostNL faces a more rapid volume decline in its mail operations or its restructuring program does not deliver the envisaged cost savings. Lower-than-expected cash flow generation because of capital expenditures (capex) or working capital requirements exceeding our

...Despite COVID-19 headwinds in the mail segment, S&P Global Ratings anticipates that PostNL's adjusted EBITDA will exceed the 297 million achieved in 2019, reaching about 330 million. This is mainly due to accelerated growth in the parcels segment, where volumes increased by an exceptional 15% in the first nine months of 2020, fueled by favorable e-commerce trends and further supported by a positive price-mix effect. At the same time, we expect the mail segment's performance will be constrained by the COVID-19-related accelerated decline in structural addressed mail volumes (about -13% in first-nine-months 2020), integration costs, and delayed cost savings related to the Sandd acquisition, resulting in depressed levels of profitability. On a positive note, the Sandd network's merger with that of PostNL went according to plan. We do not expect adjusted debt will materially exceed its 2019-end level in 2020 or 2021. In 2019, the increase in PostNL's adjusted debt to 611 million (from about...

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