July 15, 2021: US Credit ratings agency Fitch Ratings has upgraded its rating for battery giant Clarios to ‘Stable’, it said on July 1, reflecting improving conditions in both the original equipment and replacement global end-markets ‘as the effects of the coronavirus pandemic wane’.
“Clarios’ revenue declined by about 11% In fiscal 2020 after several years of solid growth, but sales rebounded solidly in the first half of fiscal 2021, with revenue up about 5% from the comparable period of the prior year,” Fitch says.
The agency said it expected revenue in fiscal 2021 to excel the $8.5 billion level of 2019.
“Fitch expects continued growth in the number of global vehicles in operation, as well as increasing demand for higher-margin absorbent glass mat and enhanced flooded batteries, to drive further revenue and margin growth over the intermediate term,” it says.
Clarios needs to reduce its debt, Fitch says, which stood at around $12 billion at fiscal year-end 2020 — and the company has managed to voluntarily reduce it by $450 million so far this fiscal year.
Fitch said the prospects for Clarios were rosy, with capex over the next several years forecast to be lower than recent years because several projects were completed, and margins expected to improve because of higher production levels and savings thanks to cost-reduction initiatives.
“Revenue is further supported over the next several years by mix shifting to higher priced AGM and EFB batteries, as well as modest price increases on traditional batteries,” it says.
A move by Clarios to submit a draft statement for a potential IPO of its common stock has not been taken into account by Fitch, which said if ‘substantial proceeds’ were made, its rating could in fact rise to Positive’.