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Investing.com -- Moody’s Ratings has affirmed Alpek, S.A.B. de C.V.’s Baa3 senior unsecured notes ratings while changing the outlook to negative from stable.
The rating agency cited Alpek’s weak earnings and stressed credit metrics amid a slow recovery in its core polyester business as reasons for the outlook change. Moody’s expects the company’s adjusted debt/EBITDA ratio to reach approximately 5.3x by the end of 2025, up from 3.6x at the end of 2023.
Despite anticipated improvements in PET integrated margins due to capacity rationalization, earnings are projected to remain below mid-cycle levels. This situation elevates debt leverage above the rating threshold of 3x for the next 12 months.
For the twelve months ended March 31, 2025, Alpek’s adjusted debt/EBITDA increased to 5.9x from 3.6x in December 2023. The company’s adjusted EBITDA for this period was about $405 million, nearly half of its mid-cycle level of approximately $800 million and a third of its 2021/2022 peak.
Moody’s projects that Alpek’s leverage ratio will decrease to at least 4.9x by the end of 2025 and further decline to approximately 4.2x by the end of 2026. The rating agency also anticipates that Alpek’s adjusted EBITDA/Interest expense ratio will equal 3.3x in 2025 before improving to nearly 4.0x in 2026, compared to 4.3x in December 2023.
The company maintains strong liquidity with $344 million in cash and equivalents as of March 31, 2025, plus $600 million in fully available committed facilities. Alpek’s next major debt repayment is $503 million on bank debt due in 2027.
Moody’s estimates Alpek will generate free cash flow of close to $31 million in 2025, considering dividend payments of around $36 million and capital expenditures of $165 million.
A ratings upgrade is unlikely given the negative outlook. However, factors that could lead to a stable outlook include improved leverage toward 3x and interest coverage moving toward 6x, along with consistent positive free cash flow generation.
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