(September 17, 2025) -- Moody's Ratings (Moody's) has today downgraded the long-term corporate family rating (CFR) of French mining and metallurgical company ERAMET S.A. ("Eramet" or "the group") to B1 from Ba3. Concurrently, we have downgraded to B1-PD from Ba3-PD the probability of default rating (PDR) and to B1 from Ba3 the instrument ratings on the group's 7.0% €500 million and 6.5% €600 million senior unsecured notes due 2028 and 2029, respectively. The outlook remains negative.
"The ratings downgrade reflects the significant slowdown in Eramet's operating performance due to lower sales volumes, prices and rising costs, resulting in further contracting credit metrics in the first half of 2025", says Goetz Grossmann, Moody's lead analyst for Eramet. "While market conditions will likely remain sluggish through the rest of this year and into 2026, Eramet may find it difficult to strengthen its credit metrics to appropriate levels for the B1 rating over the next quarters. The negative outlook also signals further downgrade pressure building, if the group failed to maintain adequate liquidity by reducing its current high cash burn and returning to positive free cash flow", adds Mr. Grossmann.
RATINGS RATIONALE
Lower volumes, commodity prices, increased costs due to logistics challenges in Gabon and a delay in the ramp-up in lithium production in Argentina caused Eramet's reported EBITDA to decline to €71 million in H1 2025 from €102 million in the prior year. In addition, lower grade in nickel ore sold along with higher operating costs impacted the performance of the group's PT Weda Bay business, in which it own a 38.7% stake. As a result, Eramet's income from joint ventures declined significantly and further negatively contributed to its Moody's adjusted EBITDA, which dropped to €424 million in the last 12 months (LTM) through June 2025 from €496 million in fiscal year 2024 (FY 2024). Excluding the negative EBITDA of its New Caledonian subsidiary Société Le Nickel's (SLN), Eramet's Moody's adjusted leverage as of LTM June 2025 stood at around 4.8x, exceeding our defined 4.5x maximum for a B1 rating
Due to the weak EBITDA and despite a reduction in working capital consumption, the group's cash flow from operations remained negative in H1 2025, even excluding SLN. Continued high, albeit reduced capital spending including lease liability payments, and ongoing dividend payments prompted Eramet's Moody's adjusted free cash flow (FCF) to remain highly negative at €728 million as of LTM June 2025 (€726 million negative in FY 2024), or €502 million excluding SLN. As a consequence, the group's reported net debt increased to €1.8 billion (excluding the €90 million net cash position at SLN) from €1.4 billion, while its net leverage rose to 2.7x from 1.8x at the end of 2024 (0.7x in 2023).
In H2 2025, we expect Eramet's financial performance and ratios to further weaken on continued sluggish demand and year over year lower prices in its key and currently mostly oversupplied commodity markets. Besides the weak metrics, which the group might find difficult to strengthen materially as required for the B1 rating over the next 12-18 months, the negative outlook reflects Eramet's recently reduced, but still adequate liquidity. A continuation of the latest cash burn rate, leading to a further erosion in its liquidity into 2026, could result in accelerating downward pressure on the rating.
The rating action also mirrors Eramet's ongoing high profit and cash flow concentration on countries with weak institutional and governance strength and low credit ratings, particularly the Government of Gabon (Caa2 stable), where the group generates the vast majority of its manganese activity EBITDA (€197 million in H1 2025) and FCF (€45 million). In this context, we also note the announcement of the Gabonese government to consider a ban of manganese ore exports from 2029. While a final decision is still pending and while we recognize the group's long-term operational presence and high investments in the business and the local infrastructure, its significant reliance on ore exports in the region makes it highly vulnerable to possible restrictions.
Other factors constraining the rating include Eramet's limited size and scale compared with that of other global mining companies that we rate, and its exposure to volatile commodity cycles, prices and demand which can lead to wide swings in revenues and earnings.
Factors that continue to support Eramet's rating include its strong market positions in high-grade manganese ore, refined manganese alloys and ferronickel production; best in class cost position in all mining activities and a large and long-life reserve base; strategy of increasing diversification through growth projects in mines and metals with positive long-term demand fundamentals, such as lithium and nickel; prudent financial policy, as shown by historically measured dividend payments and a targeted reported adjusted leverage below 1.0x on average through the cycle; and strategic importance for the Government of France (Aa3 stable), which holds a direct 27.1% stake in the group's share capital, implying expected support in case of need.
LIQUIDITY
Eramet's liquidity remains adequate. As of 30 June 2025, the group had access to around €746 million cash and cash equivalents (including €151 million of short term financial assets) and its fully undrawn €935 million committed revolving credit facility (€915 million of which maturing in 2029 and €20 million in 2028). These funds are more than sufficient to cover our forecast of continued negative Moody's adjusted FCF (excluding the expected ongoing cash burn at SLN) in the low to mid hundreds of million euro range over the next 12 months, working cash needs of around €80 million and €386 million of short-term debt as of June 2025. We expect FCF to turnaround to at least break-even levels during the next 12-to 18 months.
At the end of June 2025, Eramet complied with its financial covenants, while capacity under its gearing covenant diminished to just 6%. Given our forecast of further increasing net debt in H2 2025, we expect the group to obtain a waiver from its lenders to avoid a near-term covenant breach.
RATIONALE FOR THE NEGATIVE OUTLOOK
The negative outlook indicates further downward pressure on the rating evolving, if Eramet's current very weak credit metrics failed to progressively and considerably strengthen to reach adequate levels for its B1 rating over the next quarters. Likewise, sustained negative FCF leading to further eroding liquidity into 2026, or a breach of financial covenants could prompt a downgrade of the ratings.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
We could further downgrade the ratings, if Eramet's operating performance and cash generation failed to improve over the next few quarters, resulting in continued weak credit metrics such as (1) gross debt to EBITDA of above 4.5x, (2) EBITDA less capital expenditures (capex) to interest expense of or below 2.0x, or (3) retained cash flow to debt remaining below 15%; all on a Moody's-adjusted and sustained basis. Moreover, a weakening of Eramet's liquidity, resulting from continued negative FCF, or a covenant breach, could lead to a downgrade.
We could consider upgrading the ratings, if Eramet's (1) gross debt to EBITDA to reduce to below 3.5x, (2) EBITDA less capex to interest expense exceeds 2.5x, and (3) retained cash flow to debt improved to at least 20%; all on a Moody's-adjusted and sustained basis through-the-cycle. For an upgrade, we would also require maintenance of at least adequate liquidity and a lower earnings and cash flow concentration on high-risk geographies.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Mining published in April 2025 and available at https://ratings.moodys.com/rmc-documents/440607. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.
The net effect of any adjustments applied to rating factor scores or scorecard outputs under the primary methodology(ies), if any, was not material to the ratings addressed in this announcement.
COMPANY PROFILE
Headquartered in Paris, France, Eramet is one of the world's leading producers of manganese and nickel, used to improve the properties of steels, and mineral sands (titanium dioxide and zircon). Eramet is divided into four business units corresponding to its activities Manganese, Nickel, Mineral Sands and Lithium. In the 12 months through June 2025, Eramet generated around €2.9 billion in sales and reported EBITDA of €340 million (11.8% margin). (ends)
