Fitch Affirms Alicorp's IDRs at 'BBB'; Outlook Stable

miércoles 5 de marzo de 2014 17:40 GYT

(The following statement was released by the rating agency) CHICAGO, March 05 (Fitch) Fitch Ratings has affirmed the long-term foreign currency (FC) and local currency (LC) Issuer Default Ratings (IDR) of Alicorp S.A.A. (Alicorp) at 'BBB'. Fitch has also affirmed the 'BBB' rating of Alicorp's senior unsecured notes. The Rating Outlook is Stable. KEY RATING DRIVERS Alicorp's ratings reflect the company's strong market position in the Peruvian consumer products industry due to its leading brands, broad product portfolio and extensive distribution network. These factors combine to give the company strong competitive advantages and present formidable barriers to entry. The ratings also factor in Alicorp's solid capital structure and cash flow generation. A positive business environment, as well as a growing middle class in Peru, is expected to support the company's organic growth. Alicorp is part of Grupo Romero, one of the largest economic groups in Peru. The ratings incorporate the company's exposure to commodity and currency risks and a spike in leverage due to the company's expansion program. Net leverage is projected to decline to around 2.3x in 2014 and 2.0x in 2015 as the company absorbs recent acquisitions. Strong Market Position in Peru Alicorp is a leading consumer products company in Peru with more than 120 brands under management. The company's Peruvian operations accounted for 64% of its total revenues and 70% of its EBITDA during 2013. In Peru, Alicorp has an extensive network of exclusive distributors that is customized to the specificities of the Peruvian market, which relies on small 'Mom-and-Pop' type shops, because of the low penetration of supermarkets. About 70% of the company's products reach the end consumer through those small shops. Fitch expects strong medium-term fundamentals for organic growth in Peru. Sales will be boosted by a growing middle class with increased purchasing power. Increased credit availability is also spurring demand. Revenue Growth Organically and through Acquisitions with High Margins: During 2013, Alicorp generated PEN5,822 million (USD2.16 billion) of revenues, a 30% increase in local currency compared to 2012. Volumes were up by 26% in the same period due to increasing consumption and acquisitions in Brazil and Ecuador that accounted for 15% of revenues. Alicorp's low double-digit margins are relatively high for the industry. The company's EBITDA grew to PEN767 MM (USD284 million) during 2013 from PEN 561 million (USD216 million) in the prior year, while its margin increased to 13.2% in 2013 from 12.5% in 2012. Product Mix Balanced in Favor of Branded Consumer Products: Branded consumer products accounted for 60% of 2013 consolidated revenues, while industrial flour and edible oils represent 25% of revenues and animal nutrition the remaining 15%. Alicorp is diversifying its product base through acquisitions and by launching new products. A plant opened in Ecuador at the end of 2012 and the acquisition of Salmofoods in Chile during September 2012 increased geographical diversification and Alicorp's participation in the animal nutrition category. Alicorp further diversified during February 2013 when it acquired the Brazilian pasta company Pastificio Santa Amalia. Leverage Increases due to Acquisitions: Alicorp's total debt as of Dec. 31, 2013 was PEN1,986 million (USD709 million). All but 14% of this debt is long-term debt. The company operates with revolving credit lines for import financing and working capital requirements. Alicorp's liquidity relies on a cash position that typically ranges from USD30 million to USD40 million and uncommitted credit lines for more than USD500 million from banks available for working capital needs. The company's leverage increased to 2.6x at the end of 2013 due to capex and acquisition-related debt, which is higher than historical levels of around 1.0x. In Peru, Industrias Teal was acquired in January 2013 for USD160 million. This company allowed Alicorp to diversify its production into categories such as confectionary, chocolates, and panettones. During February 2013, Alicorp bought a 100% stake in the Brazilian company Pastificio Santa Amalia for USD96 million of cash plus the assumption of debt. Santa Amalia is a leading pasta producer in the state of Minas Gerais. Exposure to Commodity and Currency Risks: Alicorp's main raw materials are commodities such as wheat and soybean oil which the company buys in the international market. Commodities explain around 60% of variable cost. Alicorp is the main importer of soybean oil and wheat in Peru, accounting for 70% and 45% of the total imports, respectively. Its large scale allows Alicorp to be a price leader for many products in Peru. The company tries to mitigate the volatility of commodity prices by using hedges for up to 50% of its inventory. The currency mix for the total debt, after the derivatives hedge, was: 45% in Peruvian Nuevos Soles, 32% in U.S. Dollars, 18% in Brazilian Reais, with the remaining 5% in Argentine Pesos. Alicorp hedges up to 50% of its projected cash flow net exposure to foreign currency on a rolling basis. As of December 2013, 60% of the principal of its USD450 million notes issuance was hedged. Strong Equity Holder: While Alicorp's credit quality does not benefit from explicit guarantees, Fitch considers it positive that the company is part of Grupo Romero, one of the largest business groups in Peru. Grupo Romero has a presence regionally (Colombia, Ecuador and Bolivia) and across 20 different countries. RATING SENSITIVITIES Alicorp's ratings are not likely to be upgraded in the short- to medium-term. Considerations for a Positive Outlook would be additional geographic diversification in countries with similar or lower sovereign risk than Peru. Improvements in the company's margins in its existing markets would also be viewed favorably. A negative rating action could be taken if leverage, as measured by total debt/EBITDA, increased and remained at a level of more than 1.5x for a prolonged period of time, due to operational deterioration, unexpectedly high acquisition activity, or large dividend distributions. Contact: Primary Analyst Cristina Madero Associate Director +1-312-368-2080 Fitch Ratings, Inc. 70 West Madison Street Chicago, IL 60602 Secondary Analyst Josseline Jenssen Director +51-999-108-046 Committee Chairperson Joe Bormann, CFA Managing Director +1-312-368-3349 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: Additional information is available at ''. Applicable Criteria and Related Research: --'Corporate Rating Methodology' (Aug. 5, 2013); --'Evaluating Corporate Governance' (Dec. 12, 2012). 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