Research Update: Swedish Truckmaker Scania Downgraded To 'BBB' On Expected Gradual Integration With TRATON; Outlook Stable

We believe that Scania's ties with its 100%-owner TRATON will continue to strengthen over the medium term, since the company is, in our view, pivotal to TRATON's strategic goal to integrate its main brands, and to the group's credit profile. At the same time, TRATON's lower profit margins, smaller free cash flow, and higher leverage ratios make our estimate of the wider group's credit profile weaker than Scania's. As a result, we are lowering our long-term issuer credit rating on Scania to 'BBB' from 'BBB+' and the short-term Nordic regional scale rating to 'K-2' from 'K-1'. At the same time, we are affirming the 'A-2' short-term issuer credit rating and the 'zaAAA/zaA-1+' South Africa national scale ratings on Scania. The

...- We believe that Scania's ties with its 100%-owner TRATON will continue to strengthen over the medium term, since the company is, in our view, pivotal to TRATON's strategic goal to integrate its main brands, and to the group's credit profile. - At the same time, TRATON's lower profit margins, smaller free cash flow, and higher leverage ratios make our estimate of the wider group's credit profile weaker than Scania's. - As a result, we are lowering our long-term issuer credit rating on Scania to '###' from '###+' and the short-term Nordic regional scale rating to 'K-2' from 'K-1'. At the same time, we are affirming the 'A-2' short-term issuer credit rating and the 'zaAAA/zaA-1+' South Africa national scale ratings on Scania. - The outlook is stable, reflecting our expectation that TRATON will likely restore its financial performance once the COVID-19-related economic and operating challenges subside, with funds from operations (FFO) to debt of at least 60% for 2021....

Research Update