(Telestock) – S&P Global Ratings has assigned the preliminary rating “B” to the Italian manufacturer of pumps and valves Cemein view of the new capital structure and asset reorganization.
Ceme, controlled by Investindustrial and the leading Italian manufacturer of valves and pumps for coffee machines, plans to issue bonds senior variable rate guaranteed for 360 million euros to refinance the outstanding financial debt of 304 million euros, repay an equity loan of 85 million euros and pay 14 million euros in transaction fees.
The proposed new capital structure involves a reorganisation of assets, in which Ceme is ready to consolidate Procon US Inc. and Micropump Inc.two US manufacturers of rotary vane pumps and precision gears acquired by Investindustrial during 2023.
S&P’s preliminary assessment reflects the expectation that Ceme will gradually reduce debt to 5.3x in 2025 through EBITDA expansion, supported by a recovery in sales and improved profitability. After an 18% decline in sales in 2023, which reduced revenues to €265 million due to aggressive destocking by key customers in the home coffee machine segment, Ceme is forecast to achieve revenues of €335 million in 2024 (pro-forma consolidation of US entities). Revenue growth of 26% for 2024 will be largely driven by the integration of the US entities, complemented by organic growth of 7%, supported mainly by the expected recovery in the home coffee machine segment. Ceme’s revenue growth is expected to continue through 2025, with revenues forecast to increase 6% to €355 million.
Together with the expected improvement in profitability, mainly driven by the realization of cost synergies and revenue growth leading to better absorption of fixed costs, the rating agency expects a significant expansion of theEBITDA adjusted, reaching 80 million euros by 2025 (44 million euros in 2023). The expansion of EBITDA will allow the group to reduce debt, with a Debt/EBITDA ratio expected to reach 5.3x by 2025 from 6.7x expected in 2024 and 6.2x in 2023.
THE’stable outlook reflects expectations that Ceme’s debt/EBITDA ratio will sustainably improve to below 6x by 2025, free operating cash flow (FOCF) will remain positive, margins will improve above 20% and the funds from operations (FFO) cash interest coverage ratio will sustainably remain above 2.0x.
(Photo: Priscilla Du Preez on Unsplash)