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Investing.com -- S&P Global Ratings has downgraded Mondi PLC to ’BBB+’ from ’A-’ due to deteriorating credit metrics, with a stable outlook.
The rating agency cited a substantial decline in EBITDA and increased debt issuances since 2023 as key factors behind the downgrade. S&P estimates Mondi’s adjusted EBITDA for the twelve months to June 2025 at €1 billion, down from €1.9 billion in 2023.
The paper and packaging company has faced challenges including lower selling prices due to excess containerboard capacity, reduced demand from industrial and consumer end-users, and declining demand for uncoated fine paper. Material volumes also fell in 2023, while cost increases further pressured profitability.
With weakened cash generation, Mondi funded part of its capital expenditure, dividend payments, and acquisitions through new debt. S&P notes that adjusted net debt increased by €1.5 billion between June 2023 and June 2025, reaching €2.8 billion.
By year-end 2025, S&P forecasts Mondi’s adjusted debt to EBITDA ratio will be slightly above 2.0x, with adjusted funds from operations (FFO) to debt at approximately 37.6%.
The rating agency expects credit metrics to improve from 2026, reflecting reduced expansionary investments, no further large debt-funded acquisitions, and EBITDA growth. The anticipated EBITDA improvement will come from higher average selling prices and volumes, cost savings, and the full-year contribution from the Schumacher acquisition.
Capital expenditure is expected to decline to €800 million in 2025 and €650 million in 2026, down from €883 million in 2023 and €975 million in 2024. While S&P forecasts positive free operating cash flow from 2025, new debt issuances of about €700 million will weigh on credit metrics this year.
S&P has revised Mondi’s liquidity assessment from "strong" to "adequate," anticipating that sources of liquidity will exceed uses by about 1.2x in the next 12 months. This change largely reflects the mandatory repayment of €600 million notes due in April 2026.
The stable outlook indicates S&P’s expectation that credit metrics will remain in line with the ’BBB+’ rating over the medium term, supported by improved market conditions and the ramp-up of production at new assets.
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