Nordic Credit Rating has affirmed the 'BBB+' long-term issuer rating on Norway-based IT infrastructure provider Atea ASA, with a stable outlook. The 'N2' short-term issuer rating was also affirmed.
Rating rationale
The affirmation reflects Atea's sustained strong performance with revenue recovering following slower demand in some of the company's markets through 2024. We now expect rising demand, primarily in its largest Swedish and Norwegian markets, and improving cash flows over 2025-2027 supported by the company's stable operating margins. The affirmation also reflects strong and improving interest coverage and debt leverage metrics.
Moreover, the long-term issuer rating reflects Atea's leading position as the largest IT infrastructure provider in the Nordic and Baltic regions. We also view its focus on the public sector as an additional credit strength, given the sector's relatively low cyclicality. The rating is further supported by strong operating cash flow with modest investment requirements and low financial leverage.
The rating is constrained by Atea's moderate EBITDA margins, which stem primarily from a focus on reselling IT hardware and software, while the higher-margin service business generates less than 20% of revenues. The rating is further limited by the cyclical nature of IT investments, mainly in the private sector, but last year this also affected public sector investments.
Stable outlook
The stable outlook reflects our expectations that the market for IT infrastructure will continue to grow at a healthy rate with stable margins in the years ahead. It also factors in our expectations of normal supply chain conditions with stabilised working capital levels. Moreover, the outlook reflects our belief that the company will make no major debt-financed acquisitions or significantly increase leverage.
We could raise the rating to reflect revenue growth outpacing market growth, increased operating efficiency leading to EBITDA margins above 8% and a commitment to NCR-adjusted net debt/EBITDA below 1.5x and EBITDA /net interest above 15x.
We could lower the rating to reflect NCR-adjusted net debt/EBITDA above 2.5x for a protracted period, an adverse change in market dynamics or lower sales and declining EBITDA margins.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BBB+ | BBB+ |
| Outlook: | Stable | Stable |
| Short-term issuer credit rating: | N2 | N2 |
Contacts:
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@nordiccreditrating.com
Gustav Nilsson, analyst, +46735420446, gustav.nilsson@nordiccreditrating.com
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
The methodology documents used for this rating are NCR's Corporate Rating Methodology published on 8 May 2023, NCR's Rating Principles published on 14 Feb. 2024 and NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024. For the full regulatory disclaimer please see the rating report.