S&P rates Smith & Nephew BBB+

S&P said it assigned BBB+ ratings to Smith & Nephew plc.

“We assume that the Covid-19 pandemic will weaken S&N's operating metrics in 2020, pushing adjusted leverage to about 3x,” S&P said in a press release.

As a manufacturer of medical products used in elective surgical procedures such as knee and hip replacements, the company's first-half performance was hurt because such operations were canceled while hospitals focused on managing coronavirus patients, the agency said.

“We understand that sales started to recover by the summer months in most regions, with some countries such as the U.S. posting a strong recovery compared with April and May,” S&P said.

The outlook is stable. “The stable outlook reflects our view that, despite the projected leverage increase in 2020 caused by the Covid-19 pandemic--which we assume to be temporary – S&N will be able to reduce and maintain S&P Global Ratings-adjusted debt to EBITDA of less than 2.5x in 2021 and 2022, supported by continued positive free operating cash flow (FOCF),” the agency said.

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