U.S.-based Harsco Corp., a provider of industrial services and engineered products, has improved its credit metrics due to strong operating performance in the first half of 2017.


  • US-based Harsco Corp., a provider of industrial services and engineered products, has improved its credit metrics due to strong operating performance in the first half of 2017.
  • In addition, we expect that the company's financial policy will allow it to maintain leverage of less than 4x, even when incorporating potential shareholder returns or future acquisitions.
  • Therefore, we are raising our corporate credit rating on Harsco to 'BB' from 'BB-'.
  • The stable outlook reflects our expectation that improvements in Harsco's end markets will allow the company to sustain debt to EBITDA of less than 4x and a funds from operations (FFO)-to-debt ratio of greater than 20% during the next 12 months.

The upgrade reflects our expectation that Harsco will maintain its recently 
improved credit measures, including a debt-to-EBITDA metric well below 4x. We 
also believe the company's financial policy decisions will support this level 
of leverage over the next 12 to 18 months. The company's financial performance 
has improved in the first half of 2017 due to recovery in key end markets, 
such as metals, mining, and energy, and we expect Harsco to sustain this level 
of improvement through at least 2018, in part due to our forecast for 
continued growth in commodity prices. In addition, Harsco eliminated its 
dividend in 2016 in order to preserve cash flow for debt service and business 
reinvestment. It has not paid a dividend so far in 2017. We believe 
shareholder returns are likely to be relatively modest over the next 12 
months, which should enable the company to continue to reduce leverage to the 
low 3x area by the end of 2017 and about 3x by the end of 2018.

The stable outlook on Harsco reflects our expectation for relatively favorable 
market conditions that will allow the company to maintain leverage in the low 
3x area by the end of 2017 and the 3x area by the end of 2018. We believe that 
this improvement has resulted from relative stability in the company's end 
markets, continued cost improvements, and management's commitment to a 
financial policy that supports this level of leverage.