Scope Downgrades Wellis as Demand for Hot Tubs Dries up

Ratings

Scope Ratings on Thursday downgraded the issuer rating of Hungarian hot tub maker Wellis Magyarorszag to B- from BB- as demand for its products fell amid a decline in purchasing power and higher energy costs, according to a report by state news wire MTI.

Scope said the downgrade was triggered by deteriorating operating profitability in the first half as material and operating costs climbed, while low demand lifted inventories and absorbed working capital, increasing the need for external financing.

The rating agency expects operating profitability to be negative in 2022, but improve in 2023 and 2024 as cost cuts are implemented.

Scope had placed Wellis under review for a possible downgrade in July, after the company laid off 300 workers and management modified the business forecast. In October, Wellis made another 300 redundancies and changed its business forecast again.

Wellis was rated by Scope ahead of the issue early in 2021 of a HUF 9.9 billion corporate bond in the framework of the Bond Funding for Growth Scheme (BGS) of the National Bank of Hungary (MNB).

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