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Rating action

Scope Ratings GmbH (Scope) has today affirmed the B+ issuer rating on Hungarian aluminium processor Inotal Zrt. at B+/Stable. Scope has also affirmed the B+ senior unsecured debt rating.

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

Key rating drivers

Business risk profile: B (unchanged). The business risk profile is supported by the company’s highly diversified customer portfolio and stable operating profitability, while limited size and market outreach remain significant constraints on the rating.

The business risk profile remains supported by high diversification in terms of end markets. Inotal’s core products, including wire rods, aluminium strips, drawn wire and aluminium granules, are used by a variety of industries, ranging from construction and automotive to energy. This allows Inotal to benefit from the varying demand patterns of different industries. For example, the softening demand in the automotive sector is balanced by the higher demand from the energy sector. In terms of geographies, Inotal remains focused on Central and Eastern Europe and the Balkans, with Romania and Bosnia remaining its most important export markets in 2024. The customer portfolio is well diversified, with no single customer accounting for more than 10% of revenues, and the top five customers accounting for 32% of revenues in 2024.

Inotal’s business risk profile is also supported by operating profitability. In 2024 Scope-adjusted EBITDA margin* stabilised at 7.6%, a similar level to the previous year (2023: 7.3%). The primary and scrap aluminium procured is smelted before the processing of semi-finished products, a highly energy-intensive process and a major factor in operating profitability. Energy prices throughout 2024 remained relatively unchanged, resulting in reduced margin volatility compared to the previous years. Scope highlights, however, the potential swings in the price of input materials, which are affected by the changes in the geopolitical environment.

For 2025 and beyond, Scope forecasts EBITDA levels to remain consistently above 7%, driven by gradually improving demand conditions and the completion of the currently ongoing CAPEX programme.

Inotal’s business risk profile remains constrained by its limited absolute size, both in a European and global context. Revenues decreased by 1% in 2024 compared to the previous year, and volumes sold have remained relatively flat.

Financial risk profile: BBB- (unchanged). The financial risk profile reflects good leverage metrics and strong interest cover, while being constrained by the negative cash flow cover. Note that, in spite of these favourable attributes, Scope’s rating reflects our view that Inotal’s credit quality remains very significantly constrained by business profile factors noted above.

Leverage, as measured by debt/EBITDA is expected to stay close to the historical values, between 2.0 and 3.0x in the medium term. Scope expects gross debt to remain relatively stagnant (around EUR 17- 18m), as management plans to immediately refinance the amortization of the bond with long-term working capital facilities. Scope highlights that the development of leverage is highly dependent on operating profitability (which is deemed relatively volatile, due to potential shifts in input prices). As noted above, however, current ratings assume continued resilient margin performance going forward.

EBITDA interest coverage remains robust, with significant interest income realized through FX swap of the bond coupon and short-term deposit of cash in recent years (decrease in interest income assumed beyond). As the interest of the financial debt is moderate (3.2%) we expect gradual deterioration of the metric below 10.0x till 2027, driven by: i) the refinancing of the bond with new loans, increasing average cost of debt from 4% to 5.5%; ii) the sustained lower interest income.

Free operating cash flow is expected to remain negative till 2026, mainly as a result of heavy investment activity, gross CAPEX forecasted at EUR 6.7m in 2025 and EUR 8.4m in 2026, as per the information from the management. These investments are partially financed by government subsidies (EUR 3.6m expected to be received in 2026). All the subsidies have already been contracted, with the funds transferred to at certain completion rate of the investment projects. Additionally, the investments are expected to be covered by dedicated long-term investment credits, using only minimal own source.

Liquidity: adequate (unchanged). Liquidity is adequate, as sources (EUR 3.2m free cash as of YE 2024) fully cover uses (short term debt of EUR 2.3m and negative free operating cash flow of EUR 0.8m). Scope highlights the risk of an unsuccessful refinancing of the upcoming debt maturities, which, combined with the continued externally financed CAPEX programme, could lead to a significant deterioration in the issuer's liquidity profile. However, Scope considers this liquidity risk to be manageable for the time being, given the issuer’s relatively low leverage, as well as its history of successful refinancing, most recently in 2025. Additionally, Inotal has a factoring line of EUR 7m, contracted in 2023. This factoring line might serve as an additional buffer for financing potential higher working capital needs.

Scope notes that Inotal’s senior unsecured bond, issued under the Hungarian National Bank’s Bond Funding for Growth Scheme, has a covenant requiring the accelerated repayment of the outstanding nominal debt amount (EUR 11.7m as of November 2025) if the debt rating of the bond stays below B+ for more than two years (grace period) or drops below B- (accelerated repayment within 30 days). Such a development could adversely affect the company’s liquidity profile. The rating headroom to entering the grace period is zero notches. Given the limited rating headroom, the company must at least maintain its current credit profile to avoid triggering the rating-related covenant.

Supplementary rating drivers: credit-neutral (unchanged). Supplementary rating drivers are deemed credit-neutral.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s assumption that Inotal can maintain its robust financial risk profile, with debt/EBITDA of around 2.5x despite the increasing debt level, while EBITDA generation continue to be marginally impacted by softening end-market demand. Scope’s financial forecast assumes a period of significant investment between 2024 and 2027, with a net capital expenditure of EUR 20m. In addition, Scope’s base case includes the successful refinancing of the senior unsecured bond maturing in 2027.

The upside scenario for the ratings and Outlook is:

1. Free operating cash flow cover moving sustainably into positive territory after the current investment cycle, while keeping debt/EBITDA below 3.0x

The downside scenario for the ratings and Outlook is:

1. Debt/EBITDA moving above 4.0x

Debt rating

In September 2020, Inotal issued a HUF 6bn senior unsecured bond (ISIN: HU0000359948) through the Hungarian central bank’s Bond Funding for Growth scheme. The bond proceeds have been used to refinance existing third-party debt. The bond has a tenor of seven years and a fixed coupon of 3.2%. Bond repayment is in five tranches: 12.5% of the face value payable yearly between 2023 and 2026, and 50% at maturity in 2027.

Scope has rated the senior unsecured debt issued by Inotal at B+, the same level as the issuer rating. This reflects an ‘above average’ recovery for senior unsecured debt holders in a liquidation scenario. Although the recovery rate allows for more than one notch of uplift compared to the issuer rating, Scope has decided to keep the debt rating at the level of the issuer due to potential volatility in the capital structure on the path to default, and the issuer’s ability to raise additional debt ranking above the senior unsecured debt.

Environmental, social and governance (ESG) factors

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

All rating actions and rated entities

Inotal Zrt.

Issuer rating: B+/Stable, affirmation

Senior unsecured debt rating: B+, 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, (General Corporate Rating Methodology, 14 February 2025; Metals and Mining Rating Methodology, 20 October 2025), are available on 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 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 scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): registers.esma.europa.eu/cerep-publication. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at 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 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: Istvan Braun, Senior Representative
Person responsible for approval of the Credit Ratings: Karl Yuan Pettersen, Executive Director
The Credit Ratings/Outlook were first released by Scope Ratings on 20 May 2020. The Credit Ratings/Outlook were last updated on 27 November 2024.

Potential conflicts
See 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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