Delivery Hero upgraded to ’B’ by S&P on improved EBITDA outlook

Investing.com -- S&P Global Ratings has upgraded Delivery Hero SE to ’B’ from ’B-’ with a stable outlook, citing projected strong EBITDA growth and improved liquidity position.

The food delivery company generated positive S&P-adjusted EBITDA for the first time in 2024, with substantial increases expected in 2025 and 2026. Analysts project adjusted EBITDA will approach €1 billion in 2026, driven by sustained revenue growth and improved profitability.

Since acquiring Glovo in 2022, Delivery Hero has gradually transformed unprofitable regions into positive EBITDA contributors. Future growth is expected to come from deeper market penetration, increased order frequency, larger basket sizes, subscription program expansion, and advertising revenue growth.

S&P expects all operating segments to be profitable by 2026, with strong contributions from the Middle East and Asia, the company’s largest regions. Both areas have been profitable for over three years, though South Korea has faced GMV declines since 2023 due to intense competition.

The quick commerce segment is projected to turn profitable within the next 12 months, while Europe is expected to post EBITDA losses in 2025, partly due to transitioning to an employment-based model for couriers in Spain.

Free operating cash flow (FOCF) is projected to break even in 2025 and reach approximately €250 million in 2026, excluding exceptional cash outflows. These include a €329 million antitrust settlement with the European Commission and about €450 million in payments to Spanish authorities for social security claims and other disputes related to food delivery riders’ employment status.

The rating agency highlighted Delivery Hero’s ample liquidity, with cash sources expected to cover needs by more than 1.5x over the next 24 months. The company recently upsized its revolving credit facility to €840 million in the second quarter of 2025 from €600 million at year-end 2024.

S&P could lower the rating if Delivery Hero’s liquidity buffer weakens or if operating performance deteriorates, resulting in delayed deleveraging. Conversely, an upgrade could follow if the company continues to increase EBITDA, achieving leverage below 5.0x while generating solid cash flow and maintaining strong liquidity.

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