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Investing.com -- Fitch Ratings has lowered the Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) of Grupo Nutresa S.A. to ’BB+’ from ’BBB’, with a stable outlook. The downgrade comes after Jaime Gilinski, the majority shareholder, acquired Nugil S.A.S., which owns 34.81% of Nutresa’s shares. Following this transaction, Gilinski now has possession of 84.5% of Nutresa’s shares. The acquisition was financed through a $2 billion bridge loan from Nutresa, a move that Fitch believes strains the company’s capital structure and negatively impacts its corporate governance.
The revised ratings reflect Nutresa’s weakened financial profile after the transaction. Despite this, the ratings still incorporate the company’s strong business profile, which is supported by a robust brand portfolio and an extensive distribution network, enhancing its competitive position. The company is currently implementing efficiency and optimization strategies to significantly improve profitability.
The $2 billion debt increase to fund Gilinski’s acquisition has put pressure on the company’s credit metrics. Gross leverage, defined as adjusted debt to EBITDAR, is expected to rise to 4.8x, with net leverage reaching 4.5x by 2025, up from 2.3x and 1.8x at the end of 2024, respectively. This increase considers share repurchases and the Alcora transaction. Fitch anticipates that Nutresa may gradually reduce gross leverage to around 3.0x by 2028, depending on the results of efficiency plans and potential investments.
Nutresa’s EBITDAR margins are slightly above its peers. The company is working on several initiatives to improve profitability, mostly focused on logistics, commercial execution, plant efficiencies, segments restructuring, and price adjustments. Fitch projects profitability margins could rise by 2 percentage points and EBITDAR might reach COP 3.1 trillion by the end of 2025.
In Colombia’s food industry, Nutresa holds a strong competitive position, generating 60% of 2024 revenue, with a 50% market share. It maintains nearly a 50% share in key segments, contributing over 65% of its consolidated EBITDA. This strength is supported by recognized brands, innovation, and an extensive distribution network. Internationally, it ranks first or second in markets like Chile and Mexico, with significant market shares in Instant Cold Beverages.
Nutresa has a more robust business profile than Alicorp in terms of geographical and product diversification, but higher prospective leverage. Fitch anticipates Nutresa’s net leverage to increase to 4.5x in 2025 and for Alicorp to remain in the 2.0x-2.5x range during the next couple of years. Nutresa has a smaller scale, less diversification of products and brands, and a weaker credit profile when compared to Nestle SA (SIX:NESN) and Grupo Bimbo, S.A.B. De C.V. Both Nestle (NSE:NEST) and Bimbo also have a greater geographic presence than Nutresa.
Fitch has made several key assumptions including an average revenue growth of 8.5% over the projection horizon; total volume remains stable in 2025 compared to 2024; average EBITDA margin of 14.5% (after adjustment for IFRS 16 defined by Fitch) and EBITDAR margin of 15.9%; EBITDA and EBITDAR improve due to the execution of efficiency plans and optimization initiatives. Other assumptions include a capital investment intensity (capex/revenue) of 2.8% on average; dividend payment in line with management’s projections; 30% of EBITDAR between 2026-2028; disbursement of a bridge loan for USD 2 billion; Bridge loan of USD2 billion is refinanced in 2025 with a USD2 billion 144A/ Reg S bond offering; USD2 billion is deposited in a bank as a CD; Alcora’s capitalization; shares repurchase of 4.580.000 shares at a price of COP130.000; average exchange rate of COP4,412 per US dollar; average YE rate of COP4,456 per US dollar.
Factors that could lead to a negative rating action or downgrade include dividend distribution or value extraction mechanisms from the company that pressure leverage and makes the FCF negative on a sustained basis; lower than anticipated operating performance, including a decline in the company’s revenues and margins; more aggressive growth policy that includes acquisitions financed mainly with debt; net debt/EBITDAR above 4.0x on a sustained basis. Factors that could lead to a positive rating action or upgrade include net debt/EBITDAR below 3.0x on a sustained basis; increased geographic diversification in investment-grade countries; FCF margin over 3% on a sustained basis.
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