Research Update: Schaeffler AG 'BBB-' Ratings Placed On CreditWatch Negative On Weaker Earnings Due To The COVID-19 Pandemic

We project that the COVID-19 pandemic will lead to a decline in global auto sales of almost 15% in 2020, and we expect only a mild recovery in sales volumes of 6%-8% in 2021. The earnings of German automotive and industrial components supplier Schaeffler AG will come under further pressure in 2020 due to automakers' plant closures in response to the pandemic and the drop in global automotive production rates. We expect Schaeffler to achieve an S&P Global Ratings-adjusted EBITDA margin of 11%-12% in 2020, versus an already weaker level of 12.2% in 2019, a year that was marked by the group's significant restructuring efforts in a difficult market environment. We are therefore placing on CreditWatch negative our 'BBB-' long-term

...- We project that the COVID-19 pandemic will lead to a decline in global auto sales of almost 15% in 2020, and we expect only a mild recovery in sales volumes of 6%-8% in 2021. - The earnings of German automotive and industrial components supplier Schaeffler AG will come under further pressure in 2020 due to automakers' plant closures in response to the pandemic and the drop in global automotive production rates. - We expect Schaeffler to achieve an S&P Global Ratings-adjusted EBITDA margin of 11%-12% in 2020, versus an already weaker level of 12.2% in 2019, a year that was marked by the group's significant restructuring efforts in a difficult market environment. - We are therefore placing on CreditWatch negative our '###-' long-term issuer credit rating on Schaeffler, our '###-' issue ratings on Schaeffler's unsecured debt, and our '##+' issue ratings on holding company IHO Verwaltungs GmbH's secured debt. - We expect to resolve the CreditWatch placement in the second quarter of 2020,...

Research Update