Research Update: Mexican Auto Supplier Nemak S.A.B. de C.V. Outlook Revised To Negative On Delayed Deleveraging; 'BB+' Ratings Affirmed

Amid industry challenges, Nemak reported about $5 billion of total revenue and $572 million of adjusted EBITDA in 2023, down 5% and 7%, respectively, from our previous estimates, and leading to debt to EBITDA of 2.8x. On April 1, 2024, S&P Global Ratings revised its outlook on Nemak to negative from stable. We also affirmed our long-term global scale 'BB+' and national scale 'mxAA-' issuer credit ratings, and our 'BB+' issue-level rating on Nemak's sustainability-linked bonds due 2028 and 2031. The recovery rating remains at '3' (55%). The negative outlook indicates a potential downgrade if EBITDA remains constrained due to delayed industry-wide electrification transition, higher inflation, and lower-than-expected light-vehicle sales worldwide. This would mean that we could lower the ratings

...- Amid industry challenges, Nemak reported about $5 billion of total revenue and $572 million of adjusted EBITDA in 2023, down 5% and 7%, respectively, from our previous estimates, and leading to debt to EBITDA of 2.8x. - On April 1, 2024, S&P Global Ratings revised its outlook on Nemak to negative from stable. We also affirmed our long-term global scale '##+' and national scale 'mxAA-' issuer credit ratings, and our '##+' issue-level rating on Nemak's sustainability-linked bonds due 2028 and 2031. The recovery rating remains at '3' (55%). - The negative outlook indicates a potential downgrade if EBITDA remains constrained due to delayed industry-wide electrification transition, higher inflation, and lower-than-expected light-vehicle sales worldwide. This would mean that we could lower the ratings in the next 12-18 months if the company fails to reduce its debt to EBITDA to close to 2x or if its liquidity position weakens....

Research Update