S&P revises Elekta AB outlook to negative amid elevated leverage

Published 29/07/2025, 20:50
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Investing.com -- S&P Global Ratings has revised its outlook on Elekta (BS:EKTABs) AB to negative from stable, while affirming the company’s ’BBB-’ credit rating, citing sustained elevated leverage and weaker-than-expected cash flow performance.

The Swedish medical technology company’s S&P Global Ratings-adjusted debt leverage ratio reached 2.3x for fiscal 2025, exceeding the previously forecast range of 1.8x-2.0x. This follows ratios of 2.5x and 2.7x in the two preceding years.

Elekta generated lower-than-anticipated adjusted EBITDA of SEK2.1 billion in fiscal 2025, compared to expectations of SEK2.5 billion-SEK2.7 billion. The company’s adjusted EBITDA margin of 11.6% fell short of projections, attributed to stronger growth in lower-margin emerging markets and significant cost inflation pressures that weren’t fully offset by price increases.

S&P forecasts Elekta’s adjusted leverage will remain at approximately 2.3x-2.5x in fiscal 2026, higher than the previously expected 1.9x. The rating agency anticipates adjusted EBITDA of SEK2.2 billion-SEK2.5 billion annually over the next two years, with free operating cash flow of SEK0.8 billion-SEK1.0 billion annually.

The company’s business position has weakened due to volatile profitability metrics in recent years, with adjusted EBITDA margins declining from 17%-18% in 2020-2021 to below 10% in 2022, before recovering to 10%-11% in 2024-2025. S&P projects only a gradual rebound to about 12.0%-12.5% by 2026.

Elekta’s adjusted debt is unlikely to decrease due to large cash dividends and moderate acquisition spending absorbing free cash flow generation. The company maintains its dividend policy with a payout ratio of at least 50% of net income, translating to over SEK900 million annually this year and next.

S&P could downgrade Elekta if its adjusted debt-to-EBITDA ratio weakens beyond the base-case forecast of 2.3x-2.4x over the next two years. Conversely, the outlook could return to stable if the company achieves an adjusted debt leverage of 2.0x or below on a sustained basis.

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