Investing.com -- S&P Global Ratings has upgraded its issuer credit rating on Kronos Worldwide Inc (NYSE: KRO ). to ’B’ from ’B-’, reflecting an improvement in the company’s performance and credit metrics. This follows a strong performance in the second half of 2024 and the expectation that credit measures will remain appropriate for the rating, even with some potential volatility in 2025.
The issue-level rating on Kronos’ senior secured notes was also raised to ’BB-’ from ’B+’. The recovery rating remains at ’1’, indicating a rounded estimate of 90% recovery.
The outlook for Kronos remains stable, with S&P Global Ratings anticipating that the company’s metrics will be appropriate for the rating, even after factoring in potentially weak macroeconomic demand and high volatility in the titanium dioxide sector over the next year.
Kronos Worldwide Inc.’s credit metrics are expected to be suitable for the rating, even under potentially challenging macroeconomic conditions in 2025. The company’s EBITDA and margins strengthened in the second half of 2024, primarily due to higher sales volumes and increased selling prices for titanium dioxide (TiO2).
In 2025, stable to slightly weakening conditions are expected throughout the rest of the year due to an anticipated increase in the risk of softer demand across many of the company’s end markets. This is due to macroeconomic uncertainty. Kronos’ credit metrics, such as funds from operations (FFO) to debt, are anticipated to be in the 15%-20% range over the next 12 months.
S&P Global Ratings noted that there is a high degree of unpredictability around policy implementation by the U.S. administration and possible responses, specifically with regard to tariffs, and the potential effect on economies, supply chains, and credit conditions around the world.
Kronos, one of the top five producers of titanium dioxide, benefits from demand in key end markets, such as housing and architectural coatings. However, the company is more susceptible to downturns and higher raw materials costs than some of its competitors.
The ratings on Kronos are capped at the ’B’ rating on its parent company, Valhi Inc., as over 80% of Valhi’s earnings and revenue are correlated with Kronos.
The stable outlook on Kronos reflects expectations that the group’s credit measures will remain appropriate for the rating, despite elevated volatility in the TiO2 sector. S&P Global Ratings could lower its rating on Kronos during the next 12 months if the company’s sales deteriorated, leading its EBITDA margins to underperform, or if Kronos used additional debt to fund its growth plans.
Conversely, the ratings could be raised over the next year if the group’s performance improved and the company’s 2025 earnings outperformed expectations.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.