Fitch Ratings upgraded AZZ, Inc.'s Issuer Default Rating to BB+ from BB and reaffirmed the ratings on the company's senior secured term loan and revolving credit facility at BBB-. The agency also changed the Recovery Rating to RR2 from RR1 and set a Stable Outlook.
The upgrade was driven by a sizable reduction in AZZ's indebtedness over the most recent fiscal year and management's stated commitment to maintaining a conservative leverage profile. In fiscal 2026 the company repaid $385 million of outstanding debt primarily using its share of proceeds from the AVAIL joint venture's divestiture of its electrical products group, with the remainder of the repayment funded from free cash flow.
As a result of those actions, Fitch noted a meaningful decline in leverage, with EBITDA-based leverage falling to 1.3x in fiscal 2026 from roughly 2.6x in fiscal 2025. That improvement in the leverage metric was a central factor in the ratings upgrade and in the agency's continued assessment of the company's financial resilience.
Fitch highlighted several structural supports for the ratings. The firm pointed to AZZ's leading market positions in hot-dip galvanizing and metal coil coating solutions, where the company holds an estimated 27% share in independent hot-dip galvanizing and 23% in metal coil coating. Fitch also cited AZZ's relatively low exposure to commodity-price volatility and a cost base that is flexible due to the variable nature of a portion of its expenses.
At the same time, Fitch emphasized AZZ's exposure to cyclical end markets. Construction-related end markets accounted for 56% of fiscal 2026 sales, while industrial and transportation represented 9% and 8% of sales, respectively. These sector concentrations remain an important consideration in the credit assessment given their susceptibility to economic cycles.
Liquidity metrics cited by Fitch as of Feb. 28, 2026 included approximately $0.7 million in cash on hand and $338 million available under a $400 million revolving credit facility that matures in 2029. The company has authorized a new $100 million share repurchase program in addition to an existing program that had about $33 million remaining as of Feb. 28, 2026.
Looking ahead, Fitch's baseline projections call for average annual revenue growth of about 3% and stable EBITDA margins near 21%. The agency expects AZZ to average roughly $100 million a year in capital expenditures through fiscal 2030. In addition, Fitch projects annual bolt-on acquisition spending in the metal coatings segment of about $60 million per year in fiscal 2027 through fiscal 2029.
Context for markets and operations
From an operational and liquidity perspective, the combination of proceeds from a joint-venture divestiture plus free cash flow that funded the $385 million debt reduction materially altered AZZ's leverage trajectory. For stakeholders focused on production rates, mix, and working-capital conversion, the reduction in gross leverage and the stated capital deployment plans - including repurchases, capex, and targeted acquisitions - frame the near-term cash flow picture that underpins Fitch's forward-looking metrics.
This ratings action and the accompanying financial projections are likely to be monitored closely by participants in the construction materials supply chain, metal coatings suppliers and customers, and the transportation OEM supply base because of AZZ's concentrated revenue exposure to those sectors.