Taghleef Industries Holdco Ltd.

S&P Global Ratings' stable outlook reflects our expectation that Taghleef's S&P Global Ratings-adjusted FFO to debt will remain over 20% over the next 12 months and, although we expect credit metrics could improve toward 30% thereafter, we do not anticipate this over the short term. We also believe that significant investments will continue to limit material FOCF generation in 2019. We would upgrade Taghleef if it successfully executed its growth plan and established a track record of materially positive FOCF generation. We would also consider raising the rating if the company's credit metrics improved, with FFO to debt exceeding 30% on a sustainable basis. We could lower the rating if weaker market conditions or higher-than-expected investments led to a material

...We expect Taghleef Industries Holdco Ltd.'s (Taghleef's) earnings and credit metrics will be stronger in 2019 than in 2018, thanks to the impact of the Biofilm acquisition and increased focus on high-margin segments. From 2019, we expect Taghleef will recognize the full contribution from the Biofilm acquisition, completed in fourth-quarter 2018 and financed with a combination of cash and new debt. Because of the acquisition and high resin prices, 2018 credit metrics were unusually weak, and we expect Taghleef will post funds from operations (FFO) to debt over 20% this year and 25% next year, compared with 17% in 2018. We continue to expect pressure on free operating cash flow (FOCF) generation, despite delays in capital expenditures (capex) for new lines. Despite deferring its investment in the new North American line by at least another year, we expect that Taghleef, following the Biofilm acquisition, will continue to experience some pressure on FOCF generation, as it continues to make...

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