SKF AB, the world’s largest maker of bearings, had its credit rating outlook revised to negative from stable by Standard & Poor’s, reflecting concern about SKF’s credit protection improvements.
There is a one-in-three chance that SKF’s credit ratios won’t improve to levels seen corresponding with the current A-rating, S&P said today in a statement. The negative outlook means Gothenburg, Sweden-based SKF could potentially be downgraded within the next 12 months.
The rating would be lowered if SKF’s operating performance remained weak or deteriorated, which could happen if European economic conditions remain relatively depressed or deteriorate, or if the company made a large debt-funded purchase during a negative period of the business cycle, S&P said. The outlook could be revised to stable if SKF’s performance over the next few quarters is in line with or exceeds S&P’s base-case assumptions.
“Under current economic conditions, we think improvements to the group’s credit protection measures will take longer than we previously expected,” S&P analysts Eve Seiltgens and Michael Andersson said in the statement.
S&P’s base-case scenario, which assumes unchanged revenue in 2013 after a 2.5 percent decline in 2012, is that SFK will be able to maintain the current rating, it said.