Research Update: Sweden-Based Sandvik AB Upgraded To 'A-' On Stronger Credit Ratios; Outlook Stable

Sandvik's business portfolio rationalization, cost cutting, and management's commitment to lower debt, coupled with a favorable industry environment, have helped the company achieve funds from operating (FFO) to debt nearing 150% in 2018, compared with about 90% in 2017 and 25% in 2015. We expect the company to be more resilient in the future, despite exposure to cyclical end markets, thanks to a more flexible cost structure. We are raising our issuer credit rating on Sandvik to 'A-' from 'BBB+', and affirming the short-term ratings at 'A-2' and 'K-1'. The stable outlook reflects our expectation of strong credit ratios, supported by an EBITDA margin in excess of 18%, even at the bottom of the cycle, and management's commitment to maintain

... cost cutting, and management's commitment to lower debt, coupled with a favorable industry environment, have helped the company achieve funds from operating (FFO) to debt nearing 150% in 2018, compared with about 90% in 2017 and 25% in 2015. + We expect the company to be more resilient in the future, despite exposure to cyclical end markets, thanks to a more flexible cost structure. + We are raising our issuer credit rating on Sandvik to 'A-' from '###+', and affirming the short-term ratings at 'A-2' and 'K-1'. + The stable outlook reflects our expectation of strong credit ratios, supported by an EBITDA margin in excess of 18%, even at the bottom of the cycle, and management's commitment to maintain a very conservative balance sheet, with debt to EBITDA expected to be below 1.0x....

Research Update