Moody’s downgrades Eramet to B1 from Ba3 on weak performance

Investing.com -- Moody’s Ratings has downgraded French mining and metallurgical company ERAMET S.A. to B1 from Ba3, while maintaining a negative outlook.

The downgrade reflects a significant slowdown in Eramet’s operating performance due to lower sales volumes, declining prices, and rising costs, which has resulted in contracting credit metrics during the first half of 2025, according to Goetz Grossmann, Moody’s lead analyst for Eramet .

Eramet’s reported EBITDA fell to €71 million in H1 2025 from €102 million in the prior year. Contributing factors included lower volumes, reduced commodity prices, increased logistics costs in Gabon, and delays in lithium production ramp-up in Argentina. The company’s PT Weda Bay business also suffered from lower nickel ore grades and higher operating costs.

Moody’s adjusted EBITDA dropped to €424 million for the 12 months through June 2025, down from €496 million in fiscal year 2024. Excluding the negative EBITDA from its New Caledonian subsidiary Société Le Nickel (SLN), Eramet’s leverage ratio stood at approximately 4.8x, exceeding Moody’s 4.5x maximum threshold for a B1 rating.

Despite reducing working capital consumption, Eramet’s cash flow from operations remained negative in H1 2025. The company’s Moody’s adjusted free cash flow was highly negative at €728 million for the 12 months ending June 2025, or €502 million excluding SLN. As a result, reported net debt increased to €1.8 billion from €1.4 billion, while net leverage rose to 2.7x from 1.8x at the end of 2024.

Moody’s expects Eramet’s financial performance to further weaken in H2 2025 due to sluggish demand and lower year-over-year prices in key commodity markets. The negative outlook reflects concerns about the company’s ability to strengthen its metrics to levels appropriate for the B1 rating over the next 12-18 months.

The rating action also highlights Eramet’s high profit and cash flow concentration in countries with weak institutional strength, particularly Gabon (Caa2 stable), where the company generates most of its manganese activity EBITDA. The Gabonese government is considering a ban on manganese ore exports from 2029, which could significantly impact Eramet’s operations.

As of June 30, 2025, Eramet maintained adequate liquidity with access to approximately €746 million in cash and cash equivalents and a fully undrawn €935 million revolving credit facility. The company complied with its financial covenants at the end of June, though capacity under its gearing covenant diminished to just 6%.

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