The latest information on the rating, including rating reports and related methodologies, is available on this LINK.

Rating action

Scope Ratings GmbH (Scope) has today affirmed the BBB-/Stable issuer rating on Finnish chemicals (growing media) company Neova Oy as well as the BBB- senior unsecured debt rating and the S-2 short-term debt rating.

The affirmation of the BBB- issuer rating is based on Neova’s still moderate business risk and financial risk profiles, both assessed at BB+, coupled with the group’s status as a government-related entity, which guarantees public support in case of liquidity needs. The Stable Outlook reflects Scope’s expectation that credit metrics will remain relatively stable over the next few years and that the group’s ownership structure and role in the Finnish energy environment will not change.

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

Key rating drivers

Business risk profile: BB+ (unchanged). Neova’s business risk profile continues to be supported by its solid competitive position as a leading international player in growing media (i.e. substrates, mulches and organic fertilisers), particularly in Europe, where the group is the market leader through its subsidiary Kekkilä-BVB. Its products, including horticultural peat and other substrates, are essential for local, clean and green food production as they are more sustainable and environmentally friendly than traditional chemical fertilisers (positive ESG factor). In addition, Neova remains the leader in Finland for both energy peat and pellets, although the weight of this business has progressively reduced in the recent past. The planned phase-out of such a highly polluting fossil fuel in the medium term limits Neova’s exposure to some related regulatory, environmental and political risks (negative ESG factor).

Neova has moderate geographical diversification. Although operating in more than 100 countries, its home market is still dominant (around 30% of revenue) and Europe generates more than 85% of revenue. However, the highly fragmented base of professional (B2B) and retail (B2C) customers mitigates this concentration risk.

Profitability remains the weakest point of Neova’s business risk profile. The Scope-adjusted EBITDA margin* has averaged around 11% in recent years, which is low for a chemicals company. In 2024, the EBITDA margin improved significantly to 11.9% (versus 9.7% in 2023), benefiting from cost optimisation programmes and efforts to improve operational efficiency. In 2025, despite still weak demand and Neova Terra’s lower sales volumes, Scope projects profitability to remain fairly stable, mainly thanks to the positive performance of Kekkilä-BVB. From 2026, Scope forecasts profitability to improve towards 12%, supported by increased selling prices and the growing contribution from the high-profit real estate business on renewables.

Financial risk profile: BB+ (unchanged). Despite the temporary improvement in credit metrics in 2024, Neova’s financial risk profile still shows a moderate financial structure, with leverage as measured by debt/EBITDA expected to return above 3.0x from 2025.

Based on the September interim results, Scope expects debt to increase significantly at YE 2025 by around EUR 30m compared to December 2024 (EUR 179.0m against EUR 150.7m), due to weaker free operating cash flow and a high dividend payout (EUR 35.0m). With EBITDA also expected to decrease, the agency forecasts leverage to increase to 3.4x at YE 2025 (against 2.6x at YE 2024). While internal financing capacity is projected to remain relatively weak due to working capital absorption and rising capex, Scope expects leverage to remain only slightly above 3.0x over the next two years, benefiting from increasing margins.

At the same time, debt protection, as measured by EBITDA/interest, remains credit-supportive, despite net interest paid continuing to increase. In 2024, interest cover slightly improved to 4.8x from 4.4x in 2023, supported by stronger EBITDA. From 2025, the expected reduction in net interest paid through lower gross financial debt, coupled with an estimated growth in margins, could further support debt protection, leading to the interest cover ratio gradually approaching 7.0x-8.0x.

Liquidity: adequate (unchanged). Neova’s liquidity profile is solid. This is evidenced by the liquidity ratio of well over 110% until 2024, which Scope expects to remain at this level from 2025. This will be determined by lower short-term debt compared to the recent past (except for the EUR 51m bank loan maturing in 2027), coupled with an adequate amount of committed unused bank facilities (EUR 75m).

Supplementary rating drivers: +1 notch (unchanged). The one-notch uplift reflects the issuer’s status as a government-related entity. At the same time, Neova’s prudent and sensible financial policy is credit-neutral. The group’s commitment to maintaining a solid financial structure is confirmed by its optimisation of operating costs and revision of its investment plan and M&A with a view to greater caution.

Scope defines Neova as a government-related entity in accordance with Scope’s Government Related Entity Rating Methodology, based on the public ownership (Finnish state owns 50.1% of shares) and the public importance of certain services provided in Finland by the issuer, signalled by its status as a company of strategic interest for the state. The positive rating adjustment is based on the high capacity and medium willingness of the Finnish authorities to provide financial support if needed, limited to one notch as Neova is not 100% directly owned by the government (but also indirectly by municipalities/communities) and because an important portion of its activities is outside of Finland.

One or more key drivers of the credit rating action are considered ESG factors.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s expectation that Neova’s credit metrics will remain fairly stable over the next few years, with debt/EBITDA only slightly above 3.0x despite weak cash flow cover (free operating cash flow/debt at around breakeven). This is supported by Scope’s assumption that the EBITDA margin will remain above 10% and that the dividend policy will be calibrated to maintain the current rating level. The Outlook is also based on Scope’s view that the Finnish state will continue to have a strategic interest in Neova due to the group’s ownership structure and its role in the energy environment in Finland.

The upside scenario for the ratings and Outlook is:

1. a stronger balance sheet, e.g. debt/EBITDA decreasing to around 2.5x on a sustained basis, supported by an improvement of cash flow cover (i.e. free operating cash flow/debt of above 5%). This is deemed remote.

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

1. a weaker financial risk profile, as indicated by debt/EBITDA increasing to around 3.5x on a sustained basis, paired with weaker cash flow cover (i.e. negative free operating cash flow/debt);
    
2. any deterioration in Scope’s view of Neova’s status as a government-related entity of strategic interest and thereby of its potential for support from public authorities.

Debt ratings

Scope has affirmed the BBB- senior unsecured debt rating, at the same level as the issuer rating.

Neova regularly uses commercial paper under a euro commercial paper programme with a maximum of EUR 150m (fully undrawn as of November 2025). The programme is usually renewed every year on a rolling basis as it provides useful and cheap resources for working capital requirements and treasury optimisation.

The short-term debt rating is affirmed at S-2 based on the underlying BBB-/Stable issuer rating and the solid liquidity profile, coupled with good access to external funding from banks, the capital market and other funding channels.

Environmental, social and governance (ESG) factors

Neova is committed to ESG goals, as shown through its results and strategies. The company aims to contribute to the transition to a sustainable economic system. In food supply, Neova’s substrates provide a more sustainable and greener alternative to the traditional polluting chemical fertilisers. At the same time, the group is developing renewable energy plants (i.e. wind and solar) through Finland, thus actively contributing to the country’s clean energy transition. Neova's new businesses include the production of activated carbon, an important resource for air and water purification, as well as bio-stimulants and other innovations to increase the sustainability of food production and promote the circular economy.

The issuer planned to divest from peat used for energy production from 2017 as this source generates significant carbon emissions and will be phased out in Finland in the long term. However, the energy crisis in 2022 forced Neova to maintain part of this activity and postpone its termination. Overall, the potential regulatory, environmental and political risks are limited given the company’s current declining exposure and the planned full divestment in the medium term.

All rating actions and rated entities

Neova Oy

Issuer rating: BBB-/Stable, affirmation

Short-term debt rating: S-2, affirmation

Senior unsecured debt rating: BBB-, affirmation

*All credit metrics refer to Scope-adjusted figures.

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 Outlook, (General Corporate Rating Methodology, 14 February 2025; Government Related Entities Rating Methodology, 3 September 2025; Chemicals Rating Methodology, 30 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 Ratings if the Credit Ratings 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 Outlook and the principal grounds on which the Credit Ratings and Outlook are based. Following that review, the Credit Ratings and Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and Outlook are UK-endorsed.
Lead analyst: Marco Romeo, Associate Director
Person responsible for approval of the Credit Ratings: Sebastian Zank, Managing Director
The Credit Ratings/Outlooks were first released by Scope Ratings on 22 December 2023.  The Credit Ratings/Outlook were last updated on 19 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
© 2025 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin. Public Ratings are generally accessible to the public. Subscription Ratings and Private Ratings are confidential and may not be shared with any unauthorised third party.