AutoStore upgraded to ’BB’ by S&P on debt reduction and cash flow

Investing.com -- S&P Global Ratings has upgraded AutoStore Holdings Ltd. to ’BB’ from ’BB-’ with a stable outlook, citing the company’s debt reduction and improving free operating cash flow prospects.

The Norwegian warehouse automation firm plans to refinance its upcoming maturities with a new five-year $150 million term loan and a $350 million revolving credit facility. Combined with approximately $300 million in cash reserves, these funds will repay existing senior secured TLB facilities of €253 million and $167 million due in July 2026.

This refinancing will substantially reduce S&P Global Ratings-adjusted debt to about $300 million by the end of 2025, down from $550 million in 2024. The final €65 million payment to Ocado Group PLC in the first half of 2025 to settle litigation will also contribute to this debt reduction.

Despite facing challenges in 2025, with revenue declining 25% in the first half compared to the same period last year, AutoStore is expected to recover in 2026. The company’s performance has been affected by a weak macroeconomic environment and uncertainties around U.S. import tariffs, which have dampened customer investment sentiment.

S&P forecasts AutoStore’s revenue will fall 15-20% to $480-510 million in 2025 from $601 million in 2024, before growing 11-15% to $530-590 million in 2026. The company’s adjusted EBITDA margin is expected to decline to about 37% in 2025 from 43% in 2024, with adjusted EBITDA falling to approximately $185 million from $258 million, before recovering to about $220 million in 2026.

Despite weaker operating performance, AutoStore is projected to generate free operating cash flow of about $50 million in 2025, compared to $61 million in 2024. This figure is expected to increase to more than $100 million in 2026 as operating performance improves, interest payments decrease, and litigation-related payments cease.

The company maintains a medium-term leverage policy of not exceeding 2.0x net debt to company-adjusted EBITDA, which aligns with S&P’s threshold of a 40% funds from operations to debt ratio.

AutoStore generates about 22% of its revenue in the U.S., with production based primarily in Poland and a recently established assembly line in Thailand. While the company distributes products through partners who typically bear import duties, S&P expects AutoStore will likely share some tariff-related costs to maintain market positioning.

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