Sandvik AB

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 very low debt in absolute terms. We therefore expect management will adjust acquisitions and shareholder returns as appropriate to maintain the group's adjusted debt to EBITDA below 1.0x through the cycle. Negative rating pressure could emerge if the company's credit ratios were to weaken, with FFO to debt nearing 60% and debt to EBITDA progressively increasing toward 1.5x. This scenario could unfold in the case of excessive shareholder distributions or material debt-funded acquisitions, or if very adverse market conditions were coupled with higher competitive pressure. We see limited rating

...We expect Sandvik's operating performance to improve in 2021, underpinned by a recovery in demand, with an S&P Global Ratings-adjusted EBITDA margin in the 22%-23% range. Industrial activity has been improving since fourth-quarter 2020, supporting recovering demand, especially in end markets such as automotive and general engineering. Additionally, mining activities are experiencing a marked tailwind. Although energy and aerospace remain subdued (representing about 15% of sales) and exchange rates somewhat dampened sales and order intake, the recovery seems broad based. Order intake in first-quarter 2021 was up 2% against the same period last year (+12% at constant exchange rates). Sandvik's mining segment order intake increased 22% in first-quarter 2021 against a year ago (or +36% at constant exchange rates). After a challenging 2020, where Sandvik's revenue fell 11% to Swedish krona (SEK) 86.4 billion, we expect a rebound in 2021, with revenue growth of 8%-10%. On the margin side, a higher...

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