Moody’s alters ZF outlook to stable

Moody’s Investors Service said it changed its outlook for ZF Friedrichshafen AG to stable from negative.

"The outlook change to stable reflects our expectations that ZF's operating performance and credit metrics will recover in the next quarters post the weak levels in 2020 caused by the coronavirus pandemic and acquisition-induced leverage increase and meet our expectations for the Ba1 rating by FY 2023 the latest," said Falk Frey, a Moody's senior vice president and lead analyst for ZF, in a press release.

"The improvement will be driven by an expected pick-up in car production volumes in H2 2022 following still soft deliveries in the first half of the year caused by supply chain disruptions and Covid-19 related lockdowns, especially in China. It will be also driven by the expected deleveraging in the next 12-18 months supported by improved profitability and free cash flow generation and expected asset disposals," added Frey.

"Considering the scale and diversity of ZF's business profile with a significant exposure to new technologies and a robust pricing power, we anticipate that ZF will be able to achieve their deleveraging targets, even in a scenario of a weaker global economy and continued cost inflation," Frey concluded.

Moody’s also affirmed ZF’s Ba1 corporate family rating and its Ba1-PD probability of default rating. Concurrently, the agency affirmed the senior unsecured ratings of the company and its subsidiaries ZF Europe Finance BV, ZF Finance GmbH, ZF North America Capital, Inc. and TRW Automotive Inc.

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