DBRS Confirms R.R. Donnelley & Sons Co. at BBB (high), R-1 (low), Stable Trend

DBRS has confirmed the long-term and short-term ratings of R.R. Donnelley & Sons Company (RR Donnelley or the Company) at BBB (high) and R-1 (low), respectively. The trend on all ratings is Stable. The rating confirmation reflects (1) RR Donnelley’s position as the largest commercial printing companies in North America; (2) its significant scale with a broad, diverse platform of print and managed solution strategies; and (3) the Company’s ability to maintain above-average EBITDA margins despite continued industry pressure.

While DBRS notes the persistence of challenging industry conditions, RR Donnelley has successfully mitigated most of this negative impact by leveraging its diverse product and service offerings. Additionally, recent acquisitions have helped to bolster the Company’s product platform, improving internal efficiencies and providing the Company with additional scale.

Nevertheless, DBRS expects the current operating environment to remain difficult in the near term, which will likely continue to constrain meaningful organic EBITDA growth in the Company’s core businesses.

DBRS does not expect significant debt reduction in the near term as the Company is expected to continue to deploy free cash flow for small- to mid-sized acquisitions and share repurchases. However, the Company’s financial risk profile is expected to remain strong as financial ratios are expected to improve modestly in line with EBITDA and cash flow from operations growth, with total debt-to-EBITDA expected to improve below roughly 2.60x and cash flow-to-debt expected to remain flat in the mid-0.20x range at the end of the year.

DBRS notes that given the current operating environment, the Company’s ratings are likely precluded from improving beyond the current rating category in the near term. However, industry pressure translating onto the Company’s financial profile could result in ratings pressure.

Note:
All figures are in U.S. dollars unless otherwise noted.