May 15, 2017 / 9:13 PM / 3 months ago

Fitch Affirms Grupo Bimbo's Ratings at 'BBB'; Outlook Stable

(The following statement was released by the rating agency) MONTERREY, May 15 (Fitch) Fitch Ratings has affirmed Grupo Bimbo, S.A.B. de C.V.'s (Bimbo) Long-Term Foreign and Local Currency Issuer Default Rating (IDR) at 'BBB'. Fitch has also affirmed Bimbo's National long-term rating at 'AA+(mex)'. The Rating Outlook on the IDRs and National long-term rating remains Stable. A full list of ratings actions is provided at the end of this release. The affirmations incorporate Fitch's expectation that Bimbo's total debt-to-EBITDA and total adjusted debt-to-EBITDAR will remain below 3.0x and 3.5x, respectively, in the midterm, despite a challenging operating environment expected for 2017. The combination of lower economic growth expected in Mexico, difficult industry conditions in North America, and higher pressures on profitability margins related to raw material and U.S. dollar-denominated costs could hinder Bimbo's results. Fitch believes these pressures could be partially mitigated by the company's geographical diversification, strong brand equity, productivity efficiencies, and expense controls. KEY RATING DRIVERS Strong Business Position: Bimbo's ratings incorporate its solid business position as a global leader producer of baked goods with operations in Mexico, the U.S., Canada, Latin America, Europe and Asia. The company has a product portfolio of well-known brands with leading positions in many of its categories across the markets in which it participates. Bimbo has maintained relatively stable market positions across its territories despite strong competition in markets such as the U.S., Canada and Iberia. The company's competitive advantages include its position as a low-cost producer and an extensive distribution network among its main markets. Geographic Diversification: Bimbo has a good geographic diversification with around 69% of its total revenues and 47% of its total EBITDA generated from operations outside Mexico. Its acquisitions in the U.S., Canada and Europe have provided access to hard currency revenue and EBITDA generation contributing to counterbalance the exposure between mature and emerging economies. Fitch believes Bimbo will continue expanding its operations in the regions it operates in by incorporating strong brands into its product portfolio and capturing access to strategic distribution channels. In 2017 the company acquired a small producer of slow-baked bread in Canada and a producer of specialized baked goods in Morocco with estimated sales of CAD18 million and USD11 million, respectively. Fitch views these transactions as positive for the company as they will provide additional diversification. Challenged Operating Environment: Fitch expects a challenging operating year in 2017 for Bimbo given the slower economic growth in Mexico, weak industry trends in North America in the packaged bread category, and an environment of higher raw materials costs. Fitch projects the company's consolidated revenues to grow around 9% in 2017 supported mainly by the positive effect of foreign currency exchange from operations outside Mexico, higher revenues in Europe coming from the full-year consolidation of Donuts Iberia and volume growth in Mexico. Bimbo's profitability is expected to face more pressures than last year due mainly to higher raw material costs associated with a stronger U.S. dollar, higher integration costs in Canada and Europe, and higher promotional expenses to support volume growth. The company's initiatives to improve its production and distribution costs combined with selective price actions should contribute to offset some of the margin pressures. Fitch forecasts a consolidated EBITDA margin of around 10% for the company in 2017. Stable Leverage Fitch projects Bimbo's total debt-to-EBITDA and total adjusted debt-to-EBITDAR to be around 2.9x and 3.4x in 2017, respectively, and then gradually decline to 2.5x and 3.0x by 2018. Modest debt reductions are projected in 2017 and deleveraging in 2018 is expected to be related to the payment of local issuances for MXN5 billion and higher EBTIDA generation. Fitch expects Bimbo to continue incorporating small bolt-on acquisitions that should not materially change our leverage forecasts. For the last 12 months (LTM) as of March 31, 2017, the company's total debt-to-EBITDA estimated by Fitch was 2.8x and its total adjusted debt-to-EBITDAR was 3.3x. Solid FCF: Fitch expects Bimbo to maintain positive free cash flow (FCF, after capex and dividends) in 2017-2018. Fitch estimates that Bimbo will generate in 2017 around MXN17.6 billion of cash flow from operations (CFFO) that will be sufficient to cover capex of MXN13.2 billion and dividends of MXN1.3 billion. FCF is projected at approximately MXN3.1 billion in 2017 and should increase to MXN6.1 billion in 2018 due to lower capex, stable dividends and higher cash flow generation. For the LTM as of March 31, 2017, Bimbo's Fitch-calculated FCF was MXN3.5 billion. KEY ASSUMPTIONS Fitch's key assumptions within our rating case for the issuer include: --Consolidated revenue increase of 9% in 2017 and 4% in 2018; --EBITDA margin around 10% in 2017 and 11% in 2018; --FCF of approximately MXN3 billion in 2017 and MXN6 billion in 2018; --Total debt-to-EBITDA and total adjusted debt-to-EBITDAR at around 2.5x and 3.0x, respectively, by 2018. RATING SENSITIVITIES Fitch would view as positive to credit quality a combination of debt reduction, higher profitability, and strong FCF leading to a sustained improvement in total net debt-to-EBITDA and total adjusted net debt-to-EBITDAR below to 2.0x and 2.5x, respectively. Bimbo's ratings are likely to be downgraded if there is a sustained deterioration in its revenue growth and profitability margins leading to negative FCF and a total net debt-to-EBITDA and a total adjusted net debt-to-EBITDAR above 3.0x and 3.5x, respectively. Also, significant debt-financed acquisitions could pressure the ratings. LIQUIDITY Fitch believes Bimbo's liquidity position is ample due to its positive FCF generation, adequate cash balance, and an undrawn committed credit facility of USD2 billion that expires in 2021. As of March 31, 2017, the company had MXN7.8 billion of cash and cash equivalents and short-term debt of MXN2.9 billion. In addition, Bimbo's debt amortization profile is manageable in the following two years with only MXN5 billion due in 2018. Next significant debt amortization is in 2020 for MXN17.9 billion. FULL LIST OF RATING ACTIONS Fitch affirms Bimbo's ratings as follows: --Long-Term Foreign Currency IDR at 'BBB'; --Long-Term Local Currency at IDR 'BBB'; --National Scale long-term rating at 'AA+(mex)'; --USD800 million senior notes due 2020 at 'BBB'; --USD800 million senior notes due 2022 at 'BBB'; --USD800 million senior notes due 2024 at 'BBB'; --USD500 million senior notes due 2044 at 'BBB'; --Local Certificados Bursatiles Issuances at 'AA+(mex)'. The Rating Outlook is Stable. Contact: Primary Analyst Rogelio Gonzalez Director +52-81-8399-9100 Fitch Mexico S.A. de C.V. Prol. Alfonso Reyes 2612 Monterrey, N.L., Mexico Secondary Analyst Johnny Da Silva Director +1-212-908-0367 Committee Chairperson Alberto Moreno Senior Director +52-81-8399-9100 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: elizabeth.fogerty@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Criteria for Rating Non-Financial Corporates (pub. 10 Mar 2017) here National Scale Ratings Criteria (pub. 07 Mar 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below