S&P gives BB to Mahle

S&P said it gave a BB issuer rating to Mahle with a stable outlook.

“With reported revenues of about €12.8 billion in 2023, Mahle is a leading provider of pistons, oil filter modules, and thermal modules. It also exhibits a moderately diversified customer base, with the top three customers accounting for 24% and the and top 10 customers for 47%. On the other hand, about 40% of Mahle's sales rely on conventional internal combustion engines (ICEs) for light vehicles (LVs), while its adjusted EBITDA margin of about 6%-8% in the past five years was below the sector average of 9%-15%,” the agency said in a press release.

The outlook reflects the view that Mahle’s S&P Global Ratings-adjusted EBITDA margin will widen toward at least 8%-9% over 2024-2025, from 6.8% in 2023, and that it will lower its debt further through free operating cash flow (FOCF) generation and asset sales.

“We, therefore, expect a substantial improvement in credit metrics in 2024, with adjusted funds from operations (FFO) to debt of about 25% and FOCF to debt of about 5% in 2024, with incremental improvements thereafter,” S&P said in a press release.

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