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Rating action

Scope Rating GmbH (Scope) has today affirmed the BBB- issuer rating on SAF-HOLLAND SE and changed the Outlook to Stable from Positive.

The affirmation reflects the resilience of SAF-HOLLAND's business model, as evidenced by relatively stable Scope-adjusted EBITDA despite an 11% decline in revenue thanks to growth in the aftermarket business. The affirmation also reflects Scope’s expectation of debt/EBITDA* of around 2x in 2025-26, broadly unchanged from 2.0x in 2024. Scope sees some upward pressure on the Group's business risk profile, and hence its issuer rating, from the perceived sustained improvement in profitability following the Haldex acquisition. However, this view is balanced by the risks of a potential decline in general demand and the indirect effects of tariffs in the current uncertain economic environment, as well as a potential change in the business mix with low-margin original equipment (OE) business, which could depress overall margins. As a result, Scope has revised its Outlook to Stable from Positive.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Business risk profile: BBB- (unchanged). SAF-HOLLAND’s business risks are largely mitigated by: i) a large share of the high-margin aftermarket business; ii) global or regional leadership in oligopolistic markets; iii) relatively low customer concentration; and iv) a solid geographical outreach underpinned by a local for local approach. However, business risks are amplified by: i) the high exposure to the cyclical OE business (revenue contribution over 60%); and ii) the operating profitability in a peer group context due to the low single-digit profitability of the OE business.

SAF-HOLLAND’s EBITDA margin improved significantly to 13.1% in 2024, and Scope expects a margin of around 12.5% in 2025. However, this is mainly driven by the business mix, with the less profitable OE business weakening in these years. For Scope to revise its profitability assessment upwards, SAF-HOLLAND will need to demonstrate that it can maintain an EBITDA margin above 12% even if the low-margin OE business picks up. This could be achieved by keeping the share of the aftermarket business above 35% and/or through operational improvements and SG&A savings.

For 2025, SAF-HOLLAND has guided for revenue in the range of EUR 1.85bn to EUR 2.0bn. This is based on i) trucks and trailers in the core markets of EMEA and North America remaining weak in H1 2025, recover from H2 2025, and ii) growth in APAC, driven by the Indian market in particular. SAF-HOLLAND expects the aftermarket business to be stable due to the increased population of OE deliveries from previous years. In view of high economic uncertainty, Scope has assumed revenues of EUR 1.85bn, which is at the lower end of the company's guidance. Assuming a market recovery, the agency has forecast revenues of EUR 2.0bn in 2026.

Regarding the potential negative impact of tariffs, Scope sees some mitigating factors for SAF-HOLLAND: i) approx. 60% of the trucks sold in the US are currently manufactured in Mexico; ii) depending on the product, almost all of the Group's competitors have production facilities in Mexico or Canada and market concentration means that it is often possible to pass on tariffs to customers; and iii) SAF-HOLLAND's products are for the most part USMCA-compliant. However, tariffs could dampen overall demand, as recently indicated by Traton and Daimler Truck, and weigh on SAF-HOLLAND's profitability through lower and volatile capacity utilisation.

SAF-HOLLAND has guided for a lower adjusted EBIT margin in the range of 9%-10% in 2025 compared to 10.1% in 2024. This is due to general inflationary cost increases, higher wages and freight costs. Scope expects the OE business to be subdued in 2025 and foresees the high share of the aftermarket business to keep the gross profit margin above 22% in 2025, thus supporting profitability. In 2026, the agency expects the gross profit margin to decline slightly to around 21%, as it expects the share of OE business to rise again. However, Scope understands that SAF-HOLLAND plans to continue expanding its aftermarket business, which could keep aftermarket revenue above 35%. Overall, Scope anticipates an EBITDA margin of around 12.5% in 2025 and around 12% in 2026. In conjunction with its revenue projections, the agency therefore expects EBITDA to remain broadly flat at around EUR 230m in 2025, slightly below EUR 247m in 2024, followed by an increase to around EUR 240m in 2026, driven by the assumed upturn in revenues.

Financial risk profile: BBB (unchanged). SAF-HOLLAND's unchanged financial risk profile reflects continued strong credit metrics, supported by a prudent financial policy, and high exposure to the profitable and resilient aftermarket business.

Leverage, as measured by debt/EBITDA at 2.0x, remained stable in 2024. SAF-HOLLAND's business model, with a significant share of the resilient and highly profitable aftermarket business, generates sufficient cash flow to fundamentally reduce debt. However, the recently announced M&A strategy could increase debt in the coming years, although the Group has stated that no major transactions are currently planned. Scope has factored in M&A cash outflows of around EUR 50m per year in 2025-26, resulting in Scope-adjusted debt of around EUR 500m (EUR 490m at year-end 2024), respectively. SAF-HOLLAND also stated that it will accept M&A-driven leverage of close to 3.5x net debt/EBITDA (close to 4.0x based on Scope’s definition) immediately after an acquisition, as happened in 2022, with leverage increasing to 3.4x after the Haldex acquisition. At the same time, management has reaffirmed its commitment to reducing leverage to below 2.0x (based on SAF-HOLLAND’s definition) in the years following an acquisition. Based on its assumptions regarding M&A-related cash outflows, Scope expects debt/EBITDA to remain at around 2.0x in 2025 and in 2026.

Debt protection, as measured by EBITDA interest cover, has historically been strong, averaging 12.5x over 2018-2021. The debt protection metric fell to 6.8x in 2023, as a result of increased debt in connection with the Haldex acquisition and higher interest rates, where it remained in 2024. Scope expects interest costs to be in the range of EUR 35-EUR 40m per year in 2025-26 (EUR 36m in 2024) and foresees continued strong interest cover of over 6x in 2025-26.

SAF-HOLLAND’s free operating cash flow (FOCF)/debt ratio is strong, at around 20% in 2022-24 and 15% to 20% expected in 2025-26. FOCF decreased slightly to EUR 93m in 2024 from EUR 98m in 2023 and Scope expects FOCF to be around EUR 80m per year in 2025-26.

Liquidity: adequate (unchanged). SAF-HOLLAND's liquidity is considered adequate. Available liquidity sources, such as cash on the balance sheet of EUR 301m, undrawn credit lines of around EUR 188m, and the projected FOCF, cover upcoming cash uses for the next 12-18 months by well over 200%.

SAF-HOLLAND's syndicated credit facility (RCF), and the term loan issued for the acquisition of Haldex (total used amount of around EUR 155m at year-end 2024) have a financial covenant defined as a ratio of net financial debt/EBITDA ratio of less than 3.5x. The Group has been compliant as per year-end 2024. Scope expects the Group to remain compliant with comfortable headroom, supported by its business model, with a significant share of the resilient and highly profitable aftermarket business.

Supplementary rating drivers: credit-neutral (unchanged). The rating does not incorporate any adjustments related to financial policy, peer group considerations, parent support or governance and structure. Scope views SAF-HOLLAND's financial policy as credit neutral, supported by its targeted leverage corridor of 1x-2x and its proven ability to return the balance sheet to this corridor shortly after a major M&A transaction. The dividend policy is clearly shareholder-friendly, but dividend payments are largely covered by FOCF.

Outlook and rating sensitivities

The Stable Outlook reflects the resilience of SAF-HOLLAND's business, supported by a large aftermarket share, which should help the group withstand weaker market conditions. The Outlook further reflects Scope's projection of debt/EBITDA of around 2.0x in 2025-26, based on the agency's assumption that there will be no large M&A transactions in those years.

The upside scenarios for the rating and Outlook are (individually):

1. Debt/EBITDA below 2x on a sustained basis, while maintaining improved free cash flow generation
    
2. EBITDA margin above 12% on a sustained basis

The downside scenario for the rating and Outlook is (individually):

1. Debt/EBITDA around 3x on a sustained basis

Environmental, social and governance (ESG) factors

Scope has not identified any Group-specific ESG factors that could have a material impact on the SAF-HOLLAND’s creditworthiness.

The agency notes, however, that ESG factors relevant for automotive suppliers such as SAF-HOLLAND include the need to reduce the environmental impact of products or production, improve resource management (optimised use of energy and natural resources), and enhance supply chain oversight in terms of social standards and responsible sourcing.

All rating actions and rated entities

SAF HOLLAND SE

Issuer rating: BBB-/Stable, Outlook change

*All credit metrics refer to Scope-adjusted figures. 

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for this Credit Rating and/or Outlook, (Automotive Suppliers Rating Methodology, 2 April 2025; General Corporate Rating Methodology, 14 February 2025), are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Rating if the Credit Rating were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Rating: public domain, the Rated Entity and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting the Credit Rating originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Rating and/or Outlook and the principal grounds on which the Credit Rating and/or Outlook are based. Following that review, the Credit Rating and/or Outlook were not amended before being issued.

Regulatory disclosures
The Credit Rating and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Rating and/or Outlook are UK-endorsed.
Lead analyst: Gennadij Kremer, Director
Person responsible for approval of the Credit Rating: Thomas Faeh, Executive Director
The Credit Rating/Outlook were first released by Scope Ratings on 18 April 2023. The Credit Rating/Outlook were last updated on 19 April 2024.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use/exclusion of liability
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