while industrial flour, bulk oils and other industrial products (B2B) ... operating performance or cash flow generation
Corporates Consumer / Peru
Alicorp S.A.A. Full Rating Report Key Rating Drivers Ratings Foreign Currency Long-Term IDR Senior Unsecured
BBB BBB
Local Currency Long-Term IDR Senior Unsecured
BBB BBB
Solid Business Model: Alicorp S.A.A.’s ratings reflect the company’s strong market position in the Peruvian consumer products industry as a result of its leading brands, broad product portfolio and extensive distribution network. Alicorp is well positioned to benefit from a growing middle class with increasing purchasing power. The company’s Peruvian operations accounted for 62% of revenues and 77% of EBITDA in 2016. Other countries in Latin America (notably Ecuador, Chile, Brazil and Argentina) represented 38% of total sales.
IDR – Issuer Default Rating.
Diversified Product Mix: The company’s broad portfolio of products provides resilience and growth prospects. Consumer products accounted for 56% of consolidated revenues in 2016, while industrial flour, bulk oils and other industrial products (B2B) represented 23%, and aquaculture in Ecuador and Chile the remainder. Consumer goods and B2B in Peru made up about 60% of revenues in 2016. Alicorp has focused on integration of acquisitions and reducing leverage. However, Fitch Ratings doesn’t rule out opportunistic merger and acquisition activity due to strong credit metrics.
Rating Outlooks Long-Term Foreign-Currency IDR Stable Long-Term Local-Currency IDR Stable
Financial Data Alicorp S.A.A. 12/31/16 (PEN Mil.) Revenue 6,629 EBITDA 802 EBITDA Margin (%) 12.1 FFO 597 FCF 638 Cash and Marketable Securities 273 Total Adjusted Debt 1,599 Total Adjusted Debt/EBITDAR (x) 2 Total Adjust net Leverage (x) 1.6 EBITDA/Interest Paid (x) 6.0
12/31/15 6,580 722 11.0 606 712 113 2,059
Related Research Fitch Affirms Fitch Affirms Alicorp S.A.A. at ‘BBB’; Outlook Stable. (April 2017)
Analysts Johnny DaSilva +1 212 612-0367
[email protected]
2.8 2.7 3.7
Steady Margin: Fitch expects EBITDA margins to remain in the 12%‒13% range in the next two years as a result of efficiencies in procurement and S&GA and better performance of the Consumer Goods International division, due to a gradual improvement of the consumer environment in Argentina and Brazil and lower cost inflation. The division’s EBITDA margin declined to 3.4% in 2016 from 5.8% in 2015 because of high inflation, exchange rate fluctuation and the depressed consumer environment in Brazil and Argentina. Conservative Leverage: Alicorp’s financial profile is strong in its rating category and could accommodate inorganic growth, which is part of its stated growth strategy. The company reported adjusted net debt/EBITDAR of 1.6x in 2016 compared with 2.7x in 2015 thanks to strong FCF. Fitch expects Alicorp’s net leverage ratio to move toward 1.0x by year-end 2018 due to growing EBITDA. FCF was strong in 2016 due to low capex and dividends and better working capital management.
Rating Sensitivities Positive Rating Action: Fitch could upgrade Alicorp’s ratings if the company maintains sustained adjusted net/EBITDAR below 1.5x and increases geographic diversification in investment-grade countries. Fitch would view improved profitability favorably, particularly in Argentina and Brazil. Negative Rating Action: Fitch is likely to downgrade Alicorp’s ratings if the company maintains sustained total adjusted net debt/EBITDAR above 3.5x as a result of a decline in operating performance or cash flow generation associated with adverse market conditions or acquisitions.
Jose Vertiz +1 212 908-0641
[email protected]
www.fitchratings.com
Mon xx, 2017
Corporates Company Profile Alicorp is a Peruvian-based producer of consumer goods, industrial products and animal nutrition. The company focuses on three core businesses: Consumer Products (food, personal and home care products), in Peru, Brazil, Argentina, Ecuador and Colombia, among other countries; B2B Products (industrial flour, industrial lard, premix and food service products); and Aquaculture (fish and shrimp feeding). The company has a strong market position in the Peruvian consumer products industry due to its leading brands and extensive distribution network tailored to the local market. These factors, along with its position as the major commodities importer in Peru, provide strong competitive advantages and formidable barriers to entry. Around 62% of Alicorp’s revenue and 77% of its EBITDA are generated in Peru.
Financial Overview Liquidity and Capital Structure Liquidity is adequate, thanks to the company’s cash balance, low short-term debt and use of a revolving credit facility for working capital. As of Dec. 31, 2016, Alicorp had PEN273 million of cash and cash equivalents and short-term debt of PEN243 million, which is about 15% of total debt. As a result of its position as one of the major buyer of commodities within Latin American region, the company operates with revolving credit lines for import financing and working capital requirements. Alicorp has good access to capital markets. There are no major debt amortizations for the next two years after the repurchase of the majority of its senior unsecured notes. Alicorp refinanced USD387 million of its USD450 million notes with local issuances during 2015 to reduce FX risk exposure. Fitch expects Alicorp to reduce its net debt/EBITDA toward 1.0x by 2018 from 1.6x in 2016 due to increased EBITDA and slightly positive FCF. Fitch is factoring capex to increase to about 3% of total sales due to growing demand, from 1.9% in 2016. Main investments in 2016 were allocated toward the increase of installed capacity at the Inbalnor plant in Ecuador, and the acquisition of new machinery for the oils and flour production lines.
Debt Maturities and Liquidity
Related Criteria Criteria for Rating Non-Financial Corporates (March 2017)
Alicorp S.A.A. Mon xx, 2017
Source: Company data, Fitch.
243,251 392,207 98,066 7,742 0 857,578 808,537 273,483 0
Total Adjusted Debt and Leverage Ratios Total Debt (LHS) Debt/EBITDA (RHS) Net Debt/EBITDA (RHS)
(PEN Mil.) Thousands
(PEN 000, As of Dec. 31, 2016) Current Maturity Two Year Three Year Four Year Five Year Beyond Five Years Cash Flow from Operations Cash Undrawn Committed Facilities
(x)
3,000
6.0
2,000
4.0
1,000
2.0
0
0.0 2013
2014
2015
2016
Source: Company reports.
2
Corporates Cash Flow Analysis Alicorp’s revenues and EBITDA were PEN6.63 billion and PEN802 million, respectively, for 2016. These compare positively with PEN6.58 billion and PEN722 million reported in 2015. The EBITDA margin was 12.3% in 2016, following a period of depressed raw material prices and consumer environment in Latin America, notably in Argentina and Brazil. EBITDA margins should remain around 12%–13% during 2017–2018 as a result of efficiencies and a gradual improvement in the performance of operations in Brazil and Argentina. Capex decreased to PEN123 million in 2016 from PEN176 million in 2015. FCF was positive PEN638 million in 2016 due to lower capex and inventories and working capital improvements (i.e. improved cash conversion days thanks to lower collection days of 49.7 days in fourthquarter 2016 versus 57 days in fourth-quarter 2015). Fitch expects FCF to remain positive in the next two years despite higher capex, dividends paid and working capital needs with the development of the aquaculture business.
FX Screener
Fitch estimates that about 11% of group’s sales are in U.S. dollars and about 85% of Alicorp’s costs are related to U.S. dollars, mainly raw materials. Costs are hedged against their functional currency. Alicorp reduced the currency risk on its debt by issuing local bonds and local currency bank loans to buy back the majority of its USD450 million senior unsecured notes. About 5.1% of the post-hedge debt is exposed to U.S. dollars. Fitch estimates that a 20% depreciation of the local currency could have a negative effect of 0.1x in net debt leverage ratios.
Alicorp S.A.A. Mon xx, 2017
3
Corporates
Organizational Structure — Alicorp S.A.A. (PEN Mil., As of LTM Dec. 31, 2016) Grupo Romero (NR) 46.00% Alicorp S.A.A. IDR — BBB/Stable Sales Total Debt/EBITDA (x) Total Net Debt/EBITDA (x)
100.00%
100.00% Molinera Inca S.A. Peru 99.11%
100.00%
100.00%
Pastificio Santa Amalia Brazil
Alicorp Ecuador 99.90%
Industrias Teal S.A. Peru
6,629 2.0 1.6
Alicorp Colombia
USD450 Mil. Senior Unsecured Notes 2023, BBB
100.00% Alicorp Argentina
Salmofood S.A. Chile 100.00%
100.00% Global Alimentos S.A.C. Peru
Alicorp Inversiones
100.00%
Sanford S.A.C.I.F. y A. Argentina 100.00%
99.59% Vitapro S.A. Peru
0.41%
99.70% 0.30%
Vitapro Honduras
99.70% Vitapro Ecuador
0.10%
100.00%
Alicorp Holco 100.00% Espana
Pastas Especiales Argentina Vitrapro Chile
100.00% Italo Manera Argentina
NR – Not Rated. IDR – Issuer Default Rating Source: Company reports.
Alicorp S.A.A. Mon xx, 2017
4
Corporates Key Forecast Assumptions
Revenue growth of approximately 5%;
EBITDA margin around 12%‒13%;
Capex of about 3% of total revenues in 2017;
Dividends of PEN119 million in 2017;
Adjusted net debt/EBITDAR trending toward 1.0x by 2018.
Forecast Summary — Alicorp S.A.A. Historical 12/31015 12/31/16
Fitch Forecast 12/31/17 12/31/18 12/31/19
(PEN 000) Summary Income Statement Revenue Revenue Growth (%) Operating EBITDA Operating EBITDA Margin (%) Operating EBITDAR Operating EBITDAR Margin (%) Operating EBIT Operating EBIT Margin (%) Gross Interest Expense Pretax Income
6,580,488 6,628,789 6,931,746 7,271,171 7,597,845 4.7 0.7 4.6 4.9 4.5 722,486 802,316 861,843 943,395 1,012,955 11.0 12.1 12.4 13.0 13.3 722,486 802,316 861,843 943,395 1,012,955 11.0 12.1 12.4 13.0 13.3 560,615 632,276 691,878 768,866 833,084 8.5 9.5 10.0 10.6 11.0 (190,522) (163,842) (103,057) (93,777) (85,480) 239,473 463,001 595,759 681,572 755,712
Summary Balance Sheet Readily Available Cash Total Debt with Equity Credit Total Adjusted Debt with Equity Credit Net Debt
112,529 273,483 189,043 243,199 297,398 2,058,950 1,598,844 1,418,844 1,336,844 1,238,778 2,058,950 1,598,844 1,418,844 1,336,844 1,238,778 1,946,421 1,325,361 1,229,801 1,093,645 941,380
Summary Cash Flow Statement Operating EBITDA Recurring Associate Dividends Less Distributions to NCI Cash Interest Paid Implied Interest Cost (%) Cash Interest Received Cash Tax Other Items Before FFO Funds Flow from Operations FFO Margin (%) Change in Working Capital Cash Flow from Operations (Fitch Defined) Total Non-Operating/Nonrecurring Cash Flow Capex Capital Intensity (Capex/Revenue) (%) Common Dividends Net Acquisitions and Divestitures Capex, Dividends, Acquisitions and Other Items Before FCF FCF After Acquisitions and Divestitures FCF Margin (After Net Acquisitions) (%) Other Investing and Financing Cash Flow Items Net Debt Proceeds Net Equity Proceeds Total Change in Cash
722,486 3,587 (196,325) 8.3 15,705 (109,984) 171,129 606,598 9.2 281,893 888,491 — (176,605) 2.7 — (4,662) (181,267) 707,224 10.7 56,991 (751,207) — 13,008
802,316 4,307 (134,727) 7.4 9,548 (77,139) (7,246) 597,059 9.0 211,478 808,537 — (123,965) 1.9 (46,206) 6,705 (163,466) 645,071 9.7 (34,906) (449,211) — 160,954
Coverage Ratios (x) FFO Interest Coverage FFO Fixed-Charge Coverage Operating EBITDAR/Interest Paid + Rentsa Operating EBITDA/Interest Paid*
4.0 4.0 3.7 3.7
5.4 5.4 6.0 6.0
6.6 6.6 8.4 8.4
8.1 8.1 10.1 10.1
9.4 9.4 11.9 11.9
Leverage Ratios (x) Total Adjusted Debt/Operating EBITDARa Total Adjusted Net Debt/Operating EBITDARa Total Debt with Equity Credit/Operating EBITDAa FFO-Adjusted Leverage FFO-Adjusted Net Leverage
2.8 2.7 2.8 2.6 2.5
2.0 1.6 2.0 2.2 1.8
1.6 1.4 1.6 2.1 1.8
1.4 1.2 1.4 1.8 1.4
1.2 0.9 1.2 1.5 1.2
861,843 943,395 1,012,955 4,307 4,307 4,307 (103,057) (93,777) (85,480) 6.8 6.8 6.6 6,938 6,484 8,109 (178,728) (184,025) (204,042) (7,246) (7,246) (7,246) 584,056 669,137 728,603 8.4 9.2 9.6 (171,897) (162,423) (174,219) 412,160 506,714 554,383 — — — — — — — — — — — — — — — (316,600) (370,558) (402,118) 95,560 136,156 152,266 1.4 1.9 2.0 0 0 0 (180,000) (82,000) (98,066) 0 0 0 (84,440) 54,156 54,200
HOW TO INTERPRET THE FORECAST PRESENTED: The forecast presented is based on the agency’s internally produced, conservative rating case forecast. It does not represent the forecast of the rated issuer. The forecast set out above is only one component used by Fitch to assign a rating or determine a rating outlook, and the information in the forecast reflects material but not exhaustive elements of Fitch’s rating assumptions for the issuer’s financial performance. As such, it cannot be used to establish a rating, and it should not be relied on for that purpose. Fitch’s forecasts are constructed using a proprietary internal forecasting tool, which employs Fitch’s own assumptions on operating and financial performance that may not reflect the assumptions that you would make. Fitch’s own definitions of financial terms such as EBITDA, debt or free cash flow may differ from your own such definitions. Fitch may be granted access, from time to time, to confidential information on certain elements of the issuer’s forward planning. Certain elements of such information may be omitted from this forecast, even where they are included in Fitch’s own internal deliberations, where Fitch, at its sole discretion, considers the data may be potentially sensitive in a commercial, legal or regulatory context. The forecast (as with the entirety of this report) is produced strictly subject to the disclaimers set out at the end of this report. Fitch may update the forecast in future reports but assumes no responsibility to do so. a EBITDA/R after dividends to associates and minorities. NCI – Noncontrolling interests. Source: Company reports, Fitch.
Alicorp S.A.A. Mon xx, 2017
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Corporates
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