(Il Sole 24 Ore Radiocor) - Milano, 27 apr - Moody's Ratings said it has upgraded Italian defense company Leonardo's long-term issuer ratings to Baa2 from Baa3 and its senior unsecured MTN program rating to (P)Baa2 from (P)Baa3, maintaining a positive outlook.

The upgrade reflects Leonardo's strong operating performance and the sustained improvement in its credit metrics over recent years, which Moody's expect to continue over the medium term.

Moody's noted that since the last upgrade to Baa3 three years ago, Leonardo has increased revenue by around one-third and Moody's-adjusted EBITDA by 40%. Over 2023-25, the company generated more than 1.5 billion euros of Moody's-adjusted free cash flow despite a significant increase in capital expenditure, dividends and inventory. Moody's-adjusted gross leverage declined to 2.3x in 2025 from 3.4x in 2022, while net leverage decreased to 0.7x from 2.3x over the same period.

These metrics do not yet reflect the 1.7 billion euro acquisition of Iveco Group's Defence Business, which closed earlier this year. "However, we do not expect the transaction to materially weaken Leonardo's credit profile, given anticipated further earnings growth, solid cash generation and the group's sizeable cash balance at year-end 2025," it noted.

The business outlook remains supportive, notably given that 71% of group revenues derived from defense end-markets. The rating is partially constrained by the Italian sovereign rating, which is currently on par with Leonardo's senior unsecured rating. "We believe that a significant share of revenues and assets outside its domestic market, along with limited reliance on domestic funding sources, could justify a rating one notch higher than the Italian sovereign, assuming Leonardo's stand-alone credit quality continues to strengthen beyond the requirements of its current rating category," the ratings agency said.

Leonardo is rated under Moody's Government-Related Issuers Methodology due to the 30.2% ownership by the Italian Ministry of Economy and Finance.

The positive outlook reflects Moody's expectation that Leonardo revenues and earnings will continue to grow strongly over the coming years, supported by higher defense spending but also the company's own investments into production.

expansion.

(RADIOCOR) 27-04-26 10:41:18 (0192) 5 NNNN