Fitch Ratings has affirmed its Long-Term Issuer Default Ratings (IDRs) for
The Rating Outlook is Stable.
The Stable Outlook reflects Fitch's expectation that NVT will prioritize deleveraging following the acquisition of
Key Rating Drivers
Greater Breadth in Electrical & Fastening: NVT plans to acquire ECM for
ECM would add brands like
Deleverage Post Acquisition: According to management, the company will actively manage to its net leverage target of 2.0x-2.5x EBITDA and use its FCF to pay down debt in the near term, with net leverage falling to its target range by the end of 2024. Over the past five years, NVT's EBITDA leverage has generally been in the low-2.0x range, varying from 1.9x to 2.4x with the 2.4x recorded during 2020 due to the impact of pandemic.
Fitch believes NVT has sufficient deleveraging capacity with FCF projected to range from about
Record of Cash Flow Generation: NVT has generated strong FCF over the last several years, with post-dividend FCF margins ranging from 8% to 9% over the last four years, including an 8% margin in 2022. Fitch expects this trend to continue, with FCF of around 8% or greater of annual revenue through the medium term. High FCF is supported by effective working capital management and relatively low capital intensity, which should allow the company to maintain adequate financial flexibility through economic cycles.
Positive Tailwinds: Fitch expects continued medium-term growth across NVT's business segments driven by structural trends such as sustainability, electrification of everything, and digitalization, complemented by tuck-in acquisitions. Fitch views the company's relatively high exposure to industrial (42% of 2022 sales) and limited exposure to residential (
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