Will the revenue downgrade affect the company's debt covenants or financing plans?

Answer

FLSmidth’s decision to trim its 2025 revenue outlook while simultaneously lifting the adjusted EBITA‑margin guidance is a mixed signal for its balance‑sheet health. Most corporate debt covenants are tied to cash‑flow or EBITDA‑coverage ratios rather than raw top‑line growth, so the higher EBITA margin should actually improve the company’s ability to meet those covenants. In other words, the downgrade in revenue alone is unlikely to trigger a covenant breach unless the lenders have a specific “revenue‑growth” clause – which is uncommon for a capital‑intensive industrial supplier.

However, the lower sales forecast does tighten the “total‑debt‑to‑EBITDA” leverage metric in the near term, because the denominator (EBITDA) will be smaller than previously assumed. If the company is already close to its covenant ceiling, the margin upgrade may not be enough to offset the revenue shortfall, and credit‑rating agencies could start to scrutinise the debt‑service capacity. Consequently, any planned refinancing or new term‑loan issuance could be priced at a higher spread, and the market may demand tighter covenants on any fresh financing.

Trading implication

- Short‑term: Expect a modest sell‑off in FLM’s equity as the market digests the weaker top‑line, reflected in the –10 sentiment score. The price may test the recent low‑volume support around the 1‑month moving average; a break below could open a short‑term downside channel.

- Medium‑term: If the upgraded EBITA margin holds and the company can demonstrate sufficient cash‑flow coverage, the stock could stabilize and even rebound on the back of a healthier operating margin. Keep an eye on any updates from the company’s lenders or credit‑rating agencies—covenant‑related commentary will be the key catalyst for the next price move.

Actionable tip: Stay on the sidelines or trim exposure until FLSmidth issues a covenant‑compliance update. If the debt‑coverage ratios look comfortable, consider a long‑position on a pull‑back to the 20‑day EMA, targeting a bounce toward the prior resistance at DKK 1,200. If leverage looks strained, a defensive short with a stop just above the 20‑day EMA may be prudent.