S&P Global Ratings affirms "BB" Rating, Outlook revised to negative on slower profitability improvement

MAHLE GmbH (Mahle) revised down its sales and profit expectations for 2024, and now expects an EBITDA margin of 7.5%-8.5% compared with more than 8.5% previously, since it cannot fully mitigate lower auto production volumes through price adjustments and productivity gains.
As a result, we now estimate that our adjusted funds from operations (FFO) to debt ratio for Mahle will increase to about 19% in 2024, compared with our earlier estimate of 20%-25%, and believe Mahle will find it difficult to meet our leverage threshold of 25% by 2025 if challenging market conditions prevail next year.
We have therefore revised our outlook on Mahle to negative from stable and affirmed our ''BB'' long-term issuer credit rating.
The negative outlook reflects the potential for a downgrade if Mahle''s fails to increase its FFO to debt to more than 25% and restore its free operating cash flow (FOCF) to debt to more than 5% by 2025.