S&P Global Ratings affirmed Dentsply Sirona Inc.'s BBB issuer credit rating while revising its outlook to negative from stable due to an expected decline in elective procedures because of the coronavirus pandemic.
The negative outlook reflects the high uncertainty that comes with the pandemic, which may lead to a downgrade of the ratings if the ratings agency sees Dentsply's leverage increasing above 2.5x in 2020 with a lower chance for deleveraging in 2021.
Ratings said following the recommendation to dental providers by the American Dental Association to delay elective procedures, it expects a decline in demand for nonessential dental procedures in the near future. The rating agency expects to see the effect of this decision on Charlotte, N.C.-based Dentsply's revenues in the second quarter and possibly beyond that, depending on the severity and duration of the pandemic.
Dentsply designs, develops, manufactures and markets various dental and oral health products. Ratings believes the company's consumable product portfolio is heavily exposed to the volume of elective procedures. Dental consumable products accounted for about 43% of the company's consolidated net sales in 2019.
In addition, Ratings expects the company to reduce costs in order to preserve margins while demand is low, at the same time as preserving capacity to restart operations quickly when it becomes possible.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.