The rating on Wyomissing based Carpenter Technology Corp (Carpenter) reflects Standard & Poor's Ratings Services' assessment of the company's "satisfactory" business risk profile and "intermediate" financial risk profile.
The company's good market position in specialty steel long products, established customer relationships, and advanced technologies and services capabilities underpin the rating. In our view, the recent acquisition of Latrobe broadens the company's product offerings and adds needed capacity, further supporting its business risk profile. Also underpinning the rating are management's consistently moderate financial policies and the company's ability to generate cash throughout the cycle. Its participation in cyclical and competitive markets and competition from imports in commodity-grade products partly offset these factors.
We expect Carpenter's operating results and end markets to continue to improve based on continued solid demand from the company's key aerospace and energy markets. In addition, we anticipate that the Latrobe acquisition will enhance the company's performance in the aerospace sector. As a result, we expect EBITDA to be USD 400 million to USD 450 million in fiscal year 2013 and about USD 450 million in 2014. This should result in credit metrics in-line with our expectations for the rating, with debt to EBITDA below 2.5x and funds from operations (FFO) to total debt at about 30%.
Operating results for the 12 months ended Sept. 30, 2012, have improved significantly-EBITDA was about USD 359 million compared with USD 252 million in the prior year's similar period-leading to debt to EBITDA of 2.4x and adjusted FFO to debt of about 30%.
