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Rating action

Scope Ratings GmbH (Scope) has today affirmed the BB issuer rating of Hungarian agricultural and construction machinery distributor AXIÁL Javító, Kereskedelmi és Szolgáltató Kft. (AXIÁL) and revised the Outlook to Stable from Negative. Scope has also affirmed the senior unsecured debt rating at BB+.

The change in Outlook to Stable from Negative reflects Scope’s view that, although EBITDA is expected to temporarily decline due to higher costs and possible delays in government subsidies, credit metrics remain solid and within the rating guidelines. It also indicates that liquidity will remain adequate going forward.

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

Key rating drivers

Business risk profile: BB- (unchanged). AXIÁL’s competitive positioning benefits from a leading market position in the Hungarian distribution of agricultural machines and parts. The issuer has maintained an unchanged market share over many years. Scope considers this position to be well protected, thanks to AXIÁL’s strong customer service and the exclusive distribution of renowned brands such as Claas and Manitou. The company’s small size, (revenue of HUF 104bn in 2024 vs HUF 144bn in 2023) and dependence on government subsidies, which create strong revenue volatility, constrain the assessment.

Scope considers the products offered by AXIÁL to be highly cyclical. However, this volatility risk is partially offset by the company’s well-developed aftersales (11% of revenue in 2024) and rental machine service (5% of revenue in 2024), which provide more recurring revenue streams.

2024 was a transitional year. Following exceptional sales and EBITDA in 2023 thanks to significant government subsidies, demand declined in 2024 and revenue fell by 28% YoY (compared to a projected decline of 20%). With farmers waiting for new incentives before making purchases, AXIÁL shifted its sales focus to machine rentals and used equipment. This strategy enabled it to maintain high profitability levels (around 17.7%, up 2pp on a comparative basis), as used equipment sales provide better margins than sales of new equipment. Scope projects a slight increase in sales for 2025, driven by new subsidies anticipated by the end of the year. However, Scope-adjusted EBITDA* and the EBITDA margin are expected to decrease, as the issuer shifts its focus back to new machine sales, which could result in a higher cost of goods. Despite this, Scope projects that the EBITDA margin will remain solid: ranging from 12% to 13% throughout the forecast period.

Financial risk profile: BB+ (revised from BB). Scope has revised its assessment of AXIÁL's financial risk profile based on adequate liquidity (liquidity was previously inadequate). Metrics are nonetheless expected to come under pressure from declining EBITDA in 2025.

Leverage, as measured by debt/EBITDA, has historically fluctuated in line with EBITDA volatility, remaining below 2.0x through 2024. Scope forecasts a temporary rise in leverage to around 1.9x in 2025 (from 1.5x in 2024), primarily stemming from a projected decrease in EBITDA due to delayed subsidies and an increased cost of sales from product mix changes. This higher leverage is expected to be transient, with a return to around 1.5x anticipated by 2026, driven by EBITDA growth and partial debt repayment.

Interest cover has been over 10x in the past. However, from 2023 on, higher interest rates and the larger amount of debt needed to finance the rental machines and inventory, have dragged the ratio down, to 8.2x in 2024 from above 30x in 2022. Scope projects that interest cover will fall further in 2025, reaching around 8x, before potentially stabilizing between 9x and 11x, supported by increasing EBITDA, decreased debt and more favourable interest rates.

Free operating cash flow has fluctuated over the years. In 2021-2023, for example, supply chain disruptions caused a slowdown in inventory liquidation. Scope notes a positive shift in AXIÁL's working capital management in 2024, evidenced by a decrease in inventory levels and an increase in average days payable outstanding. Scope expects a further reduction in inventories, as the supply chain issues have been resolved, and the issuer is committed to improving inventory management to align it with demand.

Liquidity: adequate (revised from inadequate). Scope’s previous assessment of inadequate liquidity stemmed from a rise in short-term debt (HUF 22.1bn as at year end 2023, 116% increase YoY) used for inventory financing. In 2024, the issuer lengthened the maturity of this debt to 2026. In addition, the loans are revolving credit lines, with payment triggered by each machine sale or maturity date, ensuring no lump sum repayment. A history of successful credit line renewals and the fact that the credit line is linked to and secured by inventory support Scope’s assessment of adequate liquidity. The assessment is further reinforced by projected positive free operating cash flow over the next three years. HUF 12.7bn cash as of YE 2024 and HUF 10bn projected free operating cash flow cover cash uses (HUF 8.3bn short term debt at YE 2024) by more than 200%.

Scope notes that AXIÁL’s senior unsecured bond issued under the Hungarian Central Bank’s bond scheme has no accelerated repayment clause, but bond covenants include a pari passu clause and negative pledge.

Supplementary rating drivers: credit-neutral (unchanged). Overall, supplementary rating drivers have no impact on this credit rating action.

Outlook and rating sensitivities

The Stable Outlook from Scope is based on projected leverage of around 1.5x in the medium term, following a temporary peak at approximately 2x in 2025. This peak is expected due to lower EBITDA caused by higher cost of sales, with a subsequent improvement supported by the anticipated reboot of subsidies by year-end 2025. The Outlook also considers liquidity to remain adequate.

The upside scenario for the ratings and Outlook is:

1. Improved business risk profile linked to significant growth in size paired with greater geographical diversification (remote)

The downside scenario for the ratings and Outlook is:

1. Debt/EBITDA moving towards 4.0x

Debt rating

In September 2020, AXIÁL issued a HUF 15bn senior unsecured bond (ISIN: HU0000359930) through the Hungarian Central Bank’s Bond Funding for Growth Scheme. The bond proceeds were fully used to refinance its short-term financial debt. The bond has a tenor of 10 years and a fixed coupon of 2.0% with a bullet maturity.

Scope has affirmed the senior unsecured debt category rating at BB+. The assessment reflects a hypothetical default scenario in 2026 and is based on a liquidation value of HUF 47bn available to creditors. This compares to HUF 15.7bn of senior secured debt, a HUF 0.6bn undrawn credit line and a HUF 15bn senior unsecured bond and results in an ‘excellent recovery’ of 100%. Scope has not upgraded the issuer rating by more than one notch to reflect the risk of volatility in the capital structure and the risk of the introduction of secured debt on the path to default.

Environmental, social and governance (ESG) factors

Overall, ESG factors have no impact on this credit rating action.

All rating actions and rated entities

AXIÁL Javító, Kereskedelmi és Szolgáltató Kft.

Issuer rating: BB/Stable, Outlook change

Senior unsecured debt rating: BB+, affirmation

*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 these Credit Ratings and/or Outlook, (Retail and Wholesale Rating Methodology, 26 April 2024; 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 Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
With the Rated Entity or Related Third Party participation     YES
With access to internal documents                                           YES
With access to management                                                      YES
The following substantially material sources of information were used to prepare the Credit Ratings: 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 these Credit Ratings 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 Ratings and/or Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings and/or Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
Lead analyst: Claudia Aquino, Associate Director
Person responsible for approval of the Credit Ratings: Philipp Wass, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 9 June 2020. The Credit Ratings/Outlook were last updated on 7 May 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
© 2025 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5, D-10785 Berlin. Public Ratings are generally accessible to the public. Subscription Ratings and Private Ratings are confidential and may not be shared with any unauthorised third party.