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Investing.com -- S&P Global Ratings downgraded Hillenbrand Inc. to ’BB’ from ’BB+’ on Friday, citing continued elevated leverage, and assigned a negative outlook to the company.
The rating agency noted that Hillenbrand’s adjusted leverage has remained above 4x since fiscal 2023, partly due to increased debt from acquisitions while demand weakened amid economic uncertainty and higher interest rates.
Tariff-related uncertainty has significantly impacted Hillenbrand’s performance, with revenue declining 14% year over year in the first three quarters of fiscal 2025 as customers paused investment decisions. The company has been working to reduce its debt, cutting balances by $217 million between fiscal year-end 2024 and June 30, 2025, with an estimated additional $94 million reduction since July 1.
S&P projects Hillenbrand’s fiscal 2025 revenue will decline about 18% year over year, driven largely by the March 2025 divestiture of its Milacron business, which contributed approximately 16.5% to total revenue, and ongoing macroeconomic challenges. For 2026, the rating agency expects low-single-digit percent organic growth to be offset by the full-year impact of the Milacron divestiture, resulting in an approximately 8% year-over-year revenue decrease.
In the Advanced Processing Solutions segment, S&P forecasts a roughly 12% revenue decline for 2025, with volumes expected to remain lower through year-end, only partially offset by higher pricing. The segment’s backlog declined 10% year over year as of June 30, 2025, potentially limiting growth next year.
The Molding Technology Solutions segment is projected to see a steeper 33% revenue decline in 2025, primarily due to the Milacron divestiture and weaker demand for hot runners and mold bases, along with lower pricing.
S&P expects Hillenbrand’s adjusted EBITDA margin to decline about 220 basis points to 12.3% in 2025, from 14.5% in 2024, due to elevated operating expenses and lower volumes. The company’s selling, general, and administrative expenses are projected to remain high at roughly 25% of revenue, compared with 22% in 2024.
Free operating cash flow is forecast to decline to about $25 million in fiscal 2025 from $130 million in 2024, driven by lower EBITDA and unfavorable working capital trends. For 2026, S&P expects cash flow to improve toward $120 million due to reduced interest expense from lower debt levels.
The negative outlook reflects S&P’s expectation that tepid demand over the next several quarters will result in minimal EBITDA growth and keep adjusted leverage elevated in the high-4x to 5x range. The rating could face further downward pressure if leverage remains above 4.5x on a sustained basis.
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