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Investing.com -- Moody’s Ratings has downgraded Metsä Board Corporation’s long-term issuer rating to Baa3 from Baa2, with the outlook changed to stable from negative.
The rating action comes after rapidly deteriorating market conditions led Metsä Board to issue a profit warning on July 7, followed by guidance for even weaker third-quarter results compared to the second quarter.
The Finnish packaging materials company faces weakened demand due to low consumer confidence, which has been affected by geopolitical tensions and recent import tariffs introduced by the United States. With over 20% of its revenue generated in the U.S. but all manufacturing facilities located in Finland and Sweden, Metsä Board is particularly vulnerable to these tariffs.
Moody’s views the current market weakness as potentially structural, reflecting expectations of persistently low utilization rates among European paper packaging producers following years of capacity expansion.
The company is currently operating above its self-imposed net leverage target of 2.5x with limited measures to reduce leverage below this threshold. Moody’s now expects Metsä Board’s EBIT margin to fall below the 10% threshold with debt/EBITDA ratio exceeding 2.0x over at least the next 12-18 months.
On a positive note, Metsä Board has launched a cost savings program targeting annual EBITDA improvements of €200 million by the end of 2027. The company also believes it can release at least €150 million in working capital during the second half of 2025, primarily by reducing inventory.
The stable outlook reflects Metsä Board’s robust liquidity position, which provides sufficient cushion to navigate the challenging market environment over the next 12-18 months. Moody’s expects the market to reach its lowest point sometime during the next 12 months, with a projected debt/EBITDA ratio of 3.0x and an RCF/net debt ratio of around 40% in 2026.
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