Reuters logo
TEXT-Fitch affirms Central America Bottling Corp's ratings
January 25, 2013 / 3:50 PM / 5 years ago

TEXT-Fitch affirms Central America Bottling Corp's ratings

Jan 25 - Fitch Ratings has affirmed the following ratings of The Central
America Bottling Corporation (CBC):

--Foreign currency long-term Issuer Default Rating (IDR) at 'BB+';
--Local currency long-term IDR at 'BB+';
--USD200 million senior notes due 2022 at 'BB+'.

The Rating Outlook is Stable.

CBC's ratings are supported by the company's long track record of operations as
an anchor bottler of PepsiCo system in Central America and the Caribbean,
diversified product portfolio of leading beverages brands across its franchised
territories, and broad distribution network. The ratings also benefit from the
company's good operating performance, characterized by positive and stable cash
flow generation, and solid credit metrics. In addition, the company has the
implied operative and technical support of PepsiCo that owns an 18% of its
equity.

CBC's ratings are constrained by strong competition within the beverage
industry, the volatility in the cost of its main raw materials which pressure
the company's margins and some exposure of cash generation to low rated
countries.

CBC's ratings incorporate the acquisition of a majority (50%+1) equity interest
in the operations of Grupo Tesalia, which is the only bottler of PepsiCo
products in Ecuador. The acquisition was closed in May 2012 and the CBC paid in
cash around USD78 million and assumed USD59 million of net debt. Grupo Tesalia's
expected annual revenues and EBITDA in 2012, assuming full year operations, are
approximately USD184 million and USD22 million, respectively. On a pro forma
basis, Fitch estimates CBC's total net debt to EBITDA should be around 2.5 times
(x) at the end of 2012.

CBC's credit metrics remain solid for the rating category. For the LTM ended
Sept. 30, 2012, the company's EBITDA to gross interest expenses was 3.4x, while
adjusted leverage ratio measured as total debt plus preferred capital to EBITDA
was 3.6x and adjusted net debt to EBITDA was 2.4x. CBC's total adjusted debt
reached USD335 million, out of which USD4 million were related to preferred
capital. Fitch expects that CBC will gradually decrease its gross adjusted
leverage ratios to levels around 2.0x in the mid-term.

Fitch anticipates that CBC's margins should gradually improve as a result of
continuous implementation of production and distribution efficiencies, hedge
initiatives in main raw materials, and the consolidation of its operations in
the Caribbean and Ecuador. For the last 12 months as of September 2012, the
company's profitability has been relatively stable with an EBITDA margin around
9%. In terms of operating performance Fitch expects that CBC will maintain its
positive growth trend. Fitch estimates that the company's volume, revenues and
EBITDA (measured as operating income plus depreciation and amortization) have
increased approximately 28%, 19% and 12%, respectively, when compared to last
year same period.

Fitch expects that the company cash flow generation to be negative in 2012 as a
result of the acquisitions executed. Excluding this effect, CBC continued
generating stable free cash flow (FCF, defined as cash flow from operations less
capital expenditures and dividends) of approximately USD22 million for the last
12 months as of Sept. 30, 2012. Planned capital expenditures of around USD90
million in 2013 could limit FCF generation.

CBC's liquidity position is adequate with USD107 million of cash and marketable
securities and USD52 million of short-term debt. The company has refinanced the
short term debt during the last quarter of 2012 and does not face significant
maturities in the following years.

SENSITIVITY/RATING DRIVERS

Factors considered positive to credit quality include a combination of better
operative results, stronger cash flow generation from higher rated countries and
solid credits metrics on a sustained basis. The ratings could be negatively
pressured by a deterioration of the company's capital structure resulting in
higher debt and leverage ratios, as well as a decline in its operating results
due to adverse market conditions.


Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Corporate Rating Methodology', Aug. 8, 2012.

Applicable Criteria and Related Research:
Corporate Rating Methodology

Our Standards:The Thomson Reuters Trust Principles.
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