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Rating action

Scope Ratings GmbH (Scope) has today affirmed the B issuer rating of Hungarian construction material wholesaler Stavmat Építőanyag Kereskedelmi Zrt. (Stavmat) and revised the Outlook to Negative from Stable. Stavmat’s senior unsecured debt rating has been affirmed at B+.

Scope acknowledges early signs of a market recovery, as evidenced by the turnaround in Stavmat’s operating profitability in Q3 2025. However, the Outlook change to Negative from Stable reflects the limited nature of the recovery and the possibility that it will be slower or delayed for longer than Scope previously expected. This would keep credit metrics at deteriorated levels beyond 2025, increasing refinancing risk related to the senior unsecured bond issued through the Hungarian Central Bank’s Bond Funding for Growth Scheme. The first tranche is scheduled to amortise in July 2026.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Business risk profile: B (revised from B+). Scope has revised Stavmat’s business risk profile downwards. In the rating agency’s view, the macroeconomic headwinds in recent years have highlighted the fact that Stavmat’s size and market positioning are not substantial enough to capitalise on its market-leading position and set prices. This is because the construction material wholesale market is a highly fragmented niche market, which is closely linked to the underlying construction market. Stavmat’s limited and decreased size (EUR 85m in 2024, -5% YoY change) has also contributed to the revised assessment. The business risk profile continues to be constrained by low diversification, as Stavmat is exposed to a single product category and operates in a single country.

The slowdown of the Hungarian construction market has put continued pressure on Stavmat’s weak operating profitability since 2023. In 2024, the Scope-adjusted EBITDA margin* decreased to 4.0% from the previous year’s 5.4%. Although Scope expects the EBITDA margin to deteriorate further to below 3.5% for 2025, there have been early signs of recovery, as evidenced by Stavmat’s unaudited interim profitability (reported EBITDA margin up from -0.4% in H1 2025 to 0.5% by YTD October 2025). This is primarily driven by the continued strengthening of household demand, which generates the highest margins. Greater demand is also fuelled by the state initiatives and subsidies implemented in 2025 (e.g. the Otthon Start Program¹  initiated in September 2025). Scope forecasts a slow market recovery and gradual rise in Stavmat’s operating profitability to slightly above 4% by 2027.

Financial risk profile: B+ (unchanged). Although the deterioration in profitability has put continued pressure on Stavmat’s credit metrics, Scope forecasts that the pressure will peak in 2025. In the medium term, the recovery in operating profitability together with a decreasing amount of debt will drive an improvement in credit metrics.

Gross debt in 2024 includes the HUF 5bn senior unsecured bond issued under the Bond for Growth Scheme, the HUF 682.5m Baross Gabor loan (original amount of HUF 840m, linear amortisation), HUF 1.5bn in operating lease liabilities and around HUF 70m of other obligations. The decrease in the debt amount is due to: i) the linear amortisation of the Baross Gabor loan, which Scope expects to be repaid; and ii) the cancellation of the lease contract after the successful execution of the new investment to construct a site in Budaors, leading to lower operating lease liabilities. Scope assumes the refinancing of the senior unsecured bond tranches, which are scheduled to start amortisation in 2026 by HUF 500m per annum.

Scope expects debt/EBITDA to peak at around 6x and funds from operations/debt below 15% in 2025 before a slow recovery towards 4.0x and 20% respectively by 2027. Stavmat’s financial risk profile continues to benefit from its good interest cover, as the majority of the debt portfolio has fixed, subsidised interest rates. Nevertheless, as loans are refinanced, the high-interest rate environment will increase the effective interest rate in the medium term. Interest coverage is forecasted to remain between 4.5x and 6.0x.

The construction of the Budaors site is estimated to cost HUF 1.5bn in 2025, putting pressure on cash flow cover and turning it significantly negative. Scope forecasts free operating cash flow/debt of -17% in 2025 compared to -1% the previous year, which only saw maintenance capex. Scope forecasts that cash flow cover will turn positive in 2026. At the same time, the rating agency expects Stavmat to continue its expansion strategy. Scope believes this will renew continued pressure on cash flow cover although Stavmat has communicated that it intends to exercise a prudent financial policy regarding future investment plans.

Liquidity: adequate (unchanged). Scope considers liquidity to be adequate despite internal and external liquidity ratios of below 100% over the forecast period. Sources of liquidity include HUF 910m²  of unrestricted cash as at YE 2024. This is seemingly insufficient to cover the debt amortisation of HUF 158m scheduled for 2025, given that the estimated free operating cash flow for 2025 is significantly negative. However, as the debt has already been repaid in 2025 and funding has been secured for Stavmat’s investment capex (partly through a HUF 728m equity injection from parent company, IN Group a.s), this maturity does not pose refinancing risk.

Regarding the senior unsecured bond, which is scheduled to start amortisation in July 2026, Scope assumes that the amortising tranches will be fully refinanced. Furthermore, if needed, liquidity sources can be supplemented by the annually rolled over credit line of HUF 500m (as is customary in Hungary) and the sale of inventory at a discounted price. Scope’s view also incorporates the parent company’s willingness to support the issuer in the event of financial stress, as evidenced by the comfort letter granted for the Baross Gabor loan in addition to the equity injection. However, Scope notes that there is moderate refinancing risk and that liquidity could come under pressure if Stavmat does not address this issue in a timely manner.

Scope highlights the fact that Stavmat’s senior unsecured bond issued under the Hungarian National Bank’s Bond Funding for Growth Scheme has a covenant requiring the accelerated repayment of the outstanding nominal debt amount (HUF 5bn) if the debt rating of the bonds stays below B+ for more than two years (grace period) or drops below B- (accelerated repayment within 30 days). Such a development could adversely affect the company’s liquidity profile. The rating headroom to entering the grace period is zero notches. Given the tightening rating headroom, the company must address its credit weaknesses to avoid entering the grace period or the more severe event of the debt rating being downgraded below B-. In addition to the rating deterioration covenant, bond covenants include non-payment, insolvency proceedings, cross-default, pari passu, negative pledge, change of control and additional indebtedness covenants.

Supplementary rating drivers: -1 notch (unchanged). Scope continues to apply a negative one-notch adjustment to flag Stavmat’s ambitious financial policies regarding its expansionary investment plans and its shareholder-friendly measures. This is evidenced by the transfer of shares in City Stone Design Kft. (previously Stavmat’s subsidiary) to Stavmat’s parent company. While this transaction does not cause Stavmat to lose access to the paving plant production facility, as the asset remains in its ownership, it does reduce the return on the investment due to the transfer pricing agreement between the sister companies.

Scope notes that Stavmat’s relationship with its parent, IN Group a.s., is credit-neutral.

Outlook and rating sensitivities

The Negative Outlook reflects the increased risk that Stavmat’s credit metrics will remain under pressure, with debt/EBITDA staying at around 6x for a prolonged period due to limited visibility of a sustained market recovery. The Outlook also captures refinancing risk, which Scope still considers to be manageable, relating to the first bond instalment due in July 2026. Furthermore, Scope anticipates the prudent execution of Stavmat's investment plans, ensuring financing is secured prior to the commencement of investments.

The downside scenarios for the ratings and Outlook are (individually):

1. Debt/EBITDA remaining at or above 6x;
    
2. Inability to secure financing for the first tranche of bond amortisation, leading to inadequate liquidity.

The upside scenarios for the ratings and Outlook are (collectively):

1. Debt/EBITDA improving to below 6x on a sustained basis;
    
2. Maintenance of adequate liquidity.

Debt rating

Scope has affirmed the B+ rating on Stavmat’s senior unsecured debt, one notch above the issuer rating. The recovery analysis is based on a hypothetical default scenario in 2027 and assumes outstanding senior secured debt of HUF 1.2bn and senior unsecured debt of HUF 4.0bn. Scope’s analysis assumes a liquidation scenario given the significant asset balance, including fixed assets with high recoverable values. Although the recovery analysis indicates an ‘excellent’ recovery for senior unsecured debt, Scope has limited the uplift to one notch due to the company’s small scale and the risk that it raises higher-ranking debt which dilutes the recovery for senior unsecured debt holders.

In July 2021, Stavmat issued a HUF 5bn senior unsecured green bond through the Hungarian Central Bank’s Bond Funding for Growth Scheme. The bond proceeds were used for the paving stone plant capex and for working capital financing. The bond has a tenor of 10 years and a fixed coupon of 3%. Bond repayment is in six tranches starting from 2026, with 10% of the face value payable yearly, and a 50% balloon payment at maturity.

Environmental, social and governance (ESG) factors

Scope views Stavmat’s historically shareholder-friendly measures and frequent changes to financial plans in order to incorporate the company’s ambitious expansion strategy and investment plans as structural weaknesses. However, these do not pose additional credit risk beyond that already reflected in the negative one-notch adjustment for the company’s financial policy.

All rating actions and rated entities

Stavmat Építőanyag Kereskedelmi Zrt.

Issuer rating: B/Negative, Outlook change

Senior unsecured debt rating: B+, affirmation

*All credit metrics refer to Scope-adjusted figures.

1. https://magyarnemzet.hu/english/2025/08/home-start-program-launches-on-monday

2. Liquid sources of HUF 1.5bn as at December 2024, including cash and cash equivalents, of which HUF 600m are assumed to be restricted.

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for these Credit Ratings and/or Outlook, (General Corporate Rating Methodology, 14 Februaty 2025; Retail and Wholesale Rating Methodology, 25 June 2025), are available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): registers.esma.europa.eu/cerep-publication. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Rating if the Credit Rating were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings and/or Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
Lead analyst: Vivianne Anna Kápolnai, Associate Director
Person responsible for approval of the Credit Ratings: Philipp Wass, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 21 May 2021. The Credit Ratings/Outlook were last updated on 5 December 2024.

Potential conflicts
See scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use / exclusion of liability
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