Research Update: HeidelbergCement AG Upgraded To 'BBB/A-2' On Expected Resilient Performance Ahead Of Debt Reduction; Outlook Stable

Germany-headquartered building materials manufacturer HeidelbergCement AG significantly reduced its debt in 2020, despite the COVID-19 pandemic, thanks to strong cash flow. As a result, HeidelbergCement's reported leverage improved to 1.86x, which is between the company's boundary target of 1.5x-2.0x and down from 2.35x in 2019. We forecast that HeidelbergCement will continue to post resilient operating performance in most of its regions over 2021-2022 and maintain its conservative balance sheet management, with our key credit metric of funds from operations (FFO) to debt at about 29%-32% in 2021-2022, which is commensurate with a 'BBB' rating We therefore raised our long- and short-term issuer credit ratings on HeidelbergCement to 'BBB/A-2' from 'BBB-/A-3' and the issue ratings on its debt to 'BBB' from

... HeidelbergCement AG significantly reduced its debt in 2020, despite the COVID-19 pandemic, thanks to strong cash flow. - As a result, HeidelbergCement's reported leverage improved to 1.86x, which is between the company's boundary target of 1.5x-2.0x and down from 2.35x in 2019. - We forecast that HeidelbergCement will continue to post resilient operating performance in most of its regions over 2021-2022 and maintain its conservative balance sheet management, with our key credit metric of funds from operations (FFO) to debt at about 29%-32% in 2021-2022, which is commensurate with a '###' rating - We therefore raised our long- and short-term issuer credit ratings on HeidelbergCement to '###/A-2' from '###-/A-3' and the issue ratings on its debt to '###' from '###-'. - The stable outlook reflects our view that HeidelbergCement's FFO to debt will remain above 25% on a sustainable basis and that its adjusted EBITDA margin will remains...

Research Update