Investing.com -- S&P Global Ratings has revised the outlook for France-based auto supplier OPmobility S.E. to negative from stable, while affirming its ’BB+’ long-term issuer rating and the ’BB+’ issue rating on the company’s senior unsecured notes. The ratings agency anticipates that OPmobility’s operating performance will be impacted by a decline in light vehicle (LV) production in 2025, and ongoing operating losses in its lighting and hydrogen subdivisions during 2025 and 2026.
Despite the company’s implementation of various efficiency measures across its divisions, S&P Global Ratings expects OPmobility’s funds from operations (FFO) to debt and free operating cash flow (FOCF) to debt ratios to remain below the current rating requirements for a third consecutive year in 2025. However, it is projected that these metrics will improve significantly in 2026.
The negative outlook indicates the risk that OPmobility’s cost reduction efforts may not be sufficient to improve the FFO to debt ratio to well above 20%, and the FOCF to debt ratio to about 10% in 2026. This could be further hindered by any delays in the company’s emerging businesses reaching breakeven.
OPmobility’s 2024 credit metrics were consistent with previous forecasts but fell below rating thresholds. Despite a 1.1% decrease in global LV production in 2024, the company managed to offset this through strict cost control and investment discipline. However, the company’s ability to reduce leverage has been hampered by ongoing industry difficulties and the debt-financed acquisitions of Varroc Lighting Systems, AMLS, and an additional 33% stake in its former HBPO joint venture in 2022.
S&P Global Ratings no longer expects OPmobility to restore credit metrics in line with the rating in 2025. The updated forecast for global LV production anticipates a decline of up to 3% in 2025 and up to 1% in 2026. This is due to pressure on production levels in North America linked to U.S. tariffs, which are expected to curb LV sales in the U.S., and a predicted decline in production in Europe. Given that Europe accounted for about half of OPmobility’s sales in 2024, and North America just under 30%, LV production is expected to decline more rapidly in the company’s key regional markets compared to the global forecast.
OPmobility’s hydrogen business is growing slower than anticipated and is expected to remain unprofitable in 2025, as is the company’s lighting division. These factors are expected to limit EBITDA growth and improvements in FFO to debt this year. Despite these challenges, OPmobility is taking decisive cost-cutting actions, particularly in selling, general, and administrative and research and development functions.
S&P Global Ratings projects OPmobility’s cash generation to improve in 2025 and further in 2026. This is due to cost measures, a heightened focus on working capital optimization, and prudent management of capital expenditure. This could increase the FOCF to debt ratio to about 8% in 2025 and about 10% in 2026, and increase profitability to move FFO to debt back above the 20% threshold.
The ratings agency could lower its rating on OPmobility in the next 6–12 months if its cost reduction measures fail to offset pressure from reduced LV vehicle production, and if there are any delays in reducing losses in its nascent business fields. Conversely, the outlook could be revised to stable if OPmobility posts FOCF to debt of about 10% while maintaining FFO to debt comfortably above 20% on a sustained basis. This could be supported by successful cost reduction and cash preservation measures, robust profitability in its established divisions, and improving margins in its nascent business fields.
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