Creditreform Rating has upgraded the SME Issuer Rating of Neue ZWL Zahnradwerk Leipzig GmbH from B- to B as part of the update and confirmed a stable outlook.
The main reason for the rating upgrade is that, based on preliminary Group figures, we expect a significant improvement in the earnings situation and improved financial ratios for the past fiscal year 2021. All sites reported positive earnings, which should at least be confirmed in the current fiscal year 2022. The positive business trend is based on a slight improvement in customer diversification, with a successively increasing share of sales from products installed in electrified vehicles. A limiting factor for the rating is that after a satisfactory H1 2021, business momentum had slowed noticeably again in H2 2021, which, after adjusting for one-off earnings effects, resulted in earnings quality that was only convincing to a limited extent, especially in the European part of the Group. On the positive side, we see that NZWL has so far been able to meet its financial obligations in full and on time.
Creditreform Rating has confirmed the corporate SME rating of Neue ZWL Zahnradwerk Leipzig GmbH in the context of its rating update at B- with stable outlook.
The assessment is based on the development of 2020, which was significantly negatively affected by the COVID-19 pandemic and the overall difficult market situation of the automotive industry, which led to unsatisfying results and thus deviated significantly from the original forecasts. The results were however better than forecasted by NZWL in April 2020. The high outstanding debts against the Neue ZWL Zahnradwerke Leipzig International GmbH, or the Neue ZWL Transmission Technology and Production (Tianjin) Co., Ltd respectively continue to have a dampening effect on the rating. Due to the proven market establishment of the NZWL TTP and its positive business development, we consider these risks to be better than in the previous years. The forecasted increase in revenue and EAT for the business year 2021 of the NZWL Group remains to be seen due to the high uncertainty with regard to the pandemic, containment measures of governments as well as industry specific and general economic risks. The one year outlook for the Rating remains stable. This is based on our assessment of the positive business development of the NZWL in the second half of 2020 and in connection with the satisfactory business development of NZWLI or NZWL TTP respectively. There remains a high degree of uncertainty with regard to the pandemic, weakening of the global economy and the ongoing difficulties in the ever-changing industry of NZWL.
Further details regarding the regulatory requirements according to ESMA (European Securities and Markets Authority) Guidelines 33-9-320 can be found in the document attached below.
Creditreform Rating has assigned the SME Issuer Rating of Neue ZWL Zahnradwerk Leipzig GmbH (B) the addition "Watch NEW". As a medium-sized automotive supplier, Neue ZWL Zahnradwerk Leipzig GmbH (NZWL), as the entire automotive industry, is among the industries that are particularly exposed to the negative effects of the COVID 19 pandemic. The emerging negative macroeconomic and industry-specific developments will affect the operating business of NZWL. Especially considering the high level of dependence on the VW Group, which, like most automobile manufacturers, has temporarily stopped production nearly across all areas, a temporary production shutdown of NZWL can be expected. The extent of these adverse effects cannot be adequately estimated at the moment and will depend on the duration and severity of the pandemic, but also on governmental and institutional guidelines and supportive measures.
Creditreform Rating has confirmed the SME issuer rating of Neue ZWL Zahnradwerk Leipzig GmbH with B. The outlook was adjusted from positive to stable. The rating is based on the current business development, which in light of the economic slowdown and increasingly challenging market situation in the automotive industry can be considered stable; however, it deviates significantly from the initial expectations. A short to medium-term improvement of the still moderate key financial ratios appears therefore ambitious. We view the NZWL Group's ability to access the capital market, which was demonstrated by the timely repayment of the 2014/2019 bond, the increase of the existing 2018/2024 bond and the new issue of the 2019/2025 bond (exchange offer for the 2015/2021 bond), as positive. The receivables from the affiliated company Neue ZWL Zahnradwerke Leipzig International GmbH (NZWLI) and its Chinese subsidiary Neue ZWL Transmission Technology and Production (Tianjin) Co., Ltd (NZWL TTP) and the related financial and currency risks continue to have a dampening effect on the rating. The expected increase in sales and earnings of the NZWL Group for the current fiscal year remains to be seen in view of the recently reported deviations from projection and the general market development.
Creditreform Rating has confirmed the SME issuer rating of Neue ZWL Zahnradwerk Leipzig GmbH at B. The outlook is positive. The rating is based on the slightly improved but still moderate financial ratios. The prolongation of as well as the increase in outstanding amounts towards its affiliated company Neue ZWL Zahnradwerke Leipzig International GmbH (NZWLI) respectively, the Neue ZWL Transmission Technology and Production (Tianjin) Co., Ltd (NZWL TTP) and the related financial and currency risks have a dampening effect on the rating. Due to the current positive business development and strong order situation in Europe and China we believe that this partially offsets the existing risks. The redemption of the bond of EUR 12.5 million that will reach its maturity in March 2019 seems to be secure given the current liquidity situation. We changed the outlook of the rating to positive, due to the fact that NZWL forecasted further increases in revenues and earnings.
Creditreform Rating has confirmed the corporate rating of Neue ZWL Zahnradwerk Leipzig GmbH at B. The outlook is stable. The rating is based on the still low level creditworthiness with high indebtedness in relation to the operative earning power. In addition, we have taken into account the risk increasing receivables against the related Neue ZWL Zahnradwerke Leipzig International GmbH (NZWLI) respectively its Chinese subsidiary Neue ZWL Transmission Technology and Production (Tianjin) Co., Ltd (NZWL TTP). The current positive business development of NZWL TTP as well as the early refinancing of an instalment of the first bond due in March 1019 have a stabilizing effect on the rating. Though the revenues of NZWL could be increased in 2017 the earnings performance could not keep pace and remained on a below-average level. The for the next business year predicted improvement of the result remains to be seen.
Creditreform Rating has confirmed the corporate rating of Neue ZWL Zahnradwerk Leipzig GmbH at B. The outlook is negative. The assessable business development in 2016, based on figures during the year, has been positive and was in accordance with our expectations. However, Neue ZWL Zahnradwerk Leipzig GmbH has extended its receivables towards Neue ZWL Zahnradwerke Leipzig International GmbH and its Chinese subsidiary Neue ZWL Transmission Technology and Production (Tianjin) Co., Ltd. and thereby expanded its financing functions again in 2016.These factors, in combination with the business development of the affiliated Chinese sister company in 2016, which did not meet our expectation led to the negative outlook. We assume an improvement of the business development of the group in 2017. In addition, we expect a positive result of Neue ZWL Transmission Technology and Production (Tianjin) Co., Ltd. for the first time (which for the first time has achieved a positive result in the 4th quarter of 2016), which we regard as necessary in respect of the foreseeable financial requirements. Those two facts have a stabilizing effect on the rating. On the other hand, exogenic factors could lead to a shortfall of our expected conditional expectations, which has contributed to the negative outlook.