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Investing.com -- Fitch Ratings has upgraded Hidrovias do Brasil S.A.’s Long-Term Foreign and Local Currency Issuer Default Ratings to ’BB+’ from ’BB-’ with a Stable Outlook.
The upgrade reflects Ultrapar Participações S.A.’s controlling ownership of Hidrovias and increased support following the issuance of BRL1.4 billion in debentures guaranteed by Ultrapar. Ultrapar currently holds a 50.15% stake in the company.
Hidrovias’ credit profile benefits from its strong market position in Brazil’s North and South Corridor waterway systems, supported by take-or-pay contracts, adequate liquidity, and moderate leverage. However, the ratings remain constrained by hydrological risks, crop volatility, and client concentration.
The company’s operating performance is expected to strengthen due to improved water levels in both corridors, allowing for increased volumes. Fitch anticipates EBITDAR will reach BRL803 million in 2025 and BRL880 million in 2026, driven by volume growth of 15.7% in 2025 on a comparable basis.
Despite projections for negative free cash flow of approximately BRL700 million from 2025 until 2028 due to BRL2.2 billion in capital expenditures, Hidrovias’ capital structure is expected to improve. This improvement will be supported by a BRL1.2 billion capital injection that occurred in the first quarter of 2025 and cash inflow from the potential sale of the cabotage business, expected in the third quarter of 2025.
The company’s net debt to EBITDAR ratio should reach around 3.5x in 2025 and 2026, a significant reduction from 5.8x as of March 2025 and 7.0x in 2024.
Fitch views Hidrovias’ operations as structurally exposed to hydrological risk, which may periodically constrain revenue and cash flow generation. The company also faces portfolio concentration risk, with its main clients being large commodity producers and trading companies.
The ratings agency has also upgraded Hidrovias’ National Long-Term Rating and debentures rating to ’AAA(bra)’ from ’AA-(bra)’, and Hidrovias International Finance S.a.r.l.’s unsecured notes to ’BB+’ from ’BB-’.
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