Research Update: Sweden-Based Capital Goods Company Epiroc AB Assigned 'BBB+' Rating Outlook Stable

Epiroc AB, which was spun off from Atlas Copco earlier this year, enjoys a leading global position as a provider of mining equipment for rock drilling and excavation, expected resilience against cyclicality in equipment demand thanks to its high share of aftermarket sales revenues, as well as industry-leading EBITDA margins of around 23%-24%. We expect Epiroc to have a strong balance sheet, with adjusted debt to EBITDA below 0.5x, coupled with strongly positive free operating cash flow (FOCF) around Swedish krona (SEK) 4.0 billion-SEK4.5 billion annually. Our expectation of limited discretionary cash flow due to large dividends is only a minor offsetting factor for Epiroc's FOCF, given the strong balance sheet. We are assigning our 'BBB+' long-term issuer credit rating

...+ Epiroc AB, which was spun off from Atlas Copco earlier this year, enjoys a leading global position as a provider of mining equipment for rock drilling and excavation, expected resilience against cyclicality in equipment demand thanks to its high share of aftermarket sales revenues, as well as industry-leading EBITDA margins of around 23%-24%. + We expect Epiroc to have a strong balance sheet, with adjusted debt to EBITDA below 0.5x, coupled with strongly positive free operating cash flow (FOCF) around Swedish krona (SEK) 4.0 billion-SEK4.5 billion annually. + Our expectation of limited discretionary cash flow due to large dividends is only a minor offsetting factor for Epiroc's FOCF, given the strong balance sheet. + We are assigning our '###+' long-term issuer credit rating to Epiroc and a '###+' rating to the SEK2 billion senior unsecured bonds that Epiroc issued on Nov. 29, 2018. + The stable outlook reflects our view that, thanks to a flexible and efficient production system and low...

Research Update