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Investing.com -- Moody’s Ratings has raised the long-term issuer rating and senior unsecured notes rating of AptarGroup (NYSE:ATR), Inc. (Aptar) to Baa2 from Baa3 on March 18, 2025. The outlook for the company has been revised to stable from positive.
The upgrade is based on Moody’s expectation that Aptar will continue its conservative financial policy, with the leverage, as measured by adjusted debt to EBITDA, remaining below 2.0x at least till the end of 2025, according to Motoki Yanase, VP-Senior Credit Officer at Moody’s Ratings.
Yanase also noted that the upgrade takes into account the resilient nature of Aptar’s customized pharmaceutical packaging products segment, which enables the company to maintain a high EBITDA margin of around 20% and generate a robust free cash flow.
The Baa2 senior unsecured ratings of Aptar reflect the company’s strong profitability, with an adjusted EBITDA margin of 22% in 2024. This performance was driven by the company’s defensive pharmaceutical packaging products segment and was further supported by higher margins from its other products in the food, beverage, beauty, personal care, and home care markets.
Moody’s expects Aptar to maintain similar EBITDA margin levels in 2025 and believes the company is well-positioned to navigate a softer economic environment during the year. However, some softness is expected in the beauty segment in the first half of 2025 due to its discretionary nature, shifting consumer preferences, and competition, with modest improvements anticipated thereafter.
Aptar’s ratings also take into account the company’s diversified geographic and customer base across Europe, North America, Asia, and South America, which aids in stabilizing profit and cash flow over time.
The company adheres to a conservative financial policy with low leverage and a history of positive free cash flow generation. The adjusted debt-to-EBITDA ratio improved to 1.4x in 2024 from 1.8x in 2023. Moody’s anticipates this leverage to stay below 2x debt-to-EBITDA for the next 12-18 months, even in a softer demand environment.
Despite Aptar’s modest scale, with about $3.6 billion of revenue in 2024, and intense competition in the fragmented packaging industry, which necessitates continued investments in R&D and capital spending, Moody’s expects Aptar to maintain a conservative financial policy. The company is expected to use excess cash flow for a mix of acquisitions, dividends, and share repurchases.
Moody’s expects Aptar to maintain ample liquidity that can cover its cash outflow for the next 12-18 months. The company has a good cushion under its $600 million revolver that can cover maturing debt in 2025 and 2026 without assuming any refinancing.
The stable rating outlook is based on Moody’s expectation that Aptar will continue its conservative financial policy, maintain low financial leverage at or below 2.0x debt-to-EBITDA, and continue to generate positive free cash flow and ample liquidity.
The rating of Aptar could be upgraded if the company continues to expand its business and maintains strong credit metrics. A downgrade could occur if Aptar’s debt-to-EBITDA ratio rises above 3.0x, EBITDA margin falls below 15%, or if the company adopts a more aggressive financial policy.
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