Research Update: Leather SpA Outlook Revised To Stable On Resilient Cash Generation And Gradual Deleveraging; 'B' Rating Affirmed

We anticipate the credit metrics of Leather SpA (doing business as Pasubio) will continue to improve this year and through 2024, thanks to some revenue growth, operating efficiencies, and lower raw material prices. We estimate this will translate into S&P Global Ratings-adjusted EBITDA margins approaching 18% and debt to EBITDA gradually decreasing to 5.0x-5.5x, from 17% and 6.1x in 2022. At the same time, we anticipate the group will maintain sound cash conversion, with free operating cash flow (FOCF) to debt staying above 2% despite higher capital expenditure (capex) and interest charges. We therefore revised our outlook on Leather SpA to stable from negative and affirmed our 'B' long-term issuer credit rating, as well as our 'B' issue rating on

...- We anticipate the credit metrics of Leather SpA (doing business as Pasubio) will continue to improve this year and through 2024, thanks to some revenue growth, operating efficiencies, and lower raw material prices. - We estimate this will translate into S&P Global Ratings-adjusted EBITDA margins approaching 18% and debt to EBITDA gradually decreasing to 5.0x-5.5x, from 17% and 6.1x in 2022. - At the same time, we anticipate the group will maintain sound cash conversion, with free operating cash flow (FOCF) to debt staying above 2% despite higher capital expenditure (capex) and interest charges. - We therefore revised our outlook on Leather SpA to stable from negative and affirmed our 'B' long-term issuer credit rating, as well as our 'B' issue rating on the company's senior secured notes. - The stable outlook on the long-term issuer credit rating reflects our expectation that Pasubio's debt to EBITDA will stay well below 6x in the next 12 months while it generates annual FOCF of at least...

Research Update