March 26, 2020 / 10:42 AM / in 6 days

UPDATE 1-Casino suspends guidance due to coronavirus crisis

(Adds CEO, CFO calls, shares, analyst)

By Dominique Vidalon

PARIS, March 26 (Reuters) - French retailer Casino , battling investor concern over its high debt and weak cash position, said on Thursday it was suspending its financial guidance for 2020 due to the coronavirus pandemic.

Casino also said it had achieved a 2019 group operating profit of 1.292 billion euros ($1.41 billion), down 3.1% at constant exchange rates. Its share price fell 4%.

It said it would aim to keep costs and capital expenditure under control and push on with its asset disposal plan to reduce debt.

“We cannot reiterate our financial guidance in an economic climate that is so uncertain. But we stay mobilised regarding all our objectives such as cost cuts, inventories, or capex,” Finance Director David Lubek said on a call.

Excluding tax credits in Brazil, where it controls top retailer Grupo Pao de Aucucar, its 2019 consolidated trading profit was up 5.5% at constant exchange rates.

Casino CEO and controlling shareholder Jean-Charles Naouri has been hunting for ways to ease the company’s debts - and those of parent company Rallye, which was placed under protection from creditors in May 2019 - through asset sales and refinancing efforts.

With consolidated net debt of 4.1 billion euros at the end of 2019, Casino is engaged in a 4.5 billion euro disposal plan.

Last week it agreed to sell 567 Leader Price stores in France, plus three warehouses, to German discount rival Aldi in a deal with an enterprise value of 735 million euros..

Asset sales helped Casino cut net debt in France to 2.3 billion euros at end-2019 from 2.7 billion at end-2018 and generate recurring free cash flow of 367 million euros.

In November 2019, Casino finalised its own refinancing plan, raising 1.8 billion euros in new bank loans and extending 2 billion euros of bank maturities for four years.

Meanwhile the Paris Commercial Court on Feb. 28 approved a safeguard plan, which gives Rallye about 10 years to pay back 2.9 billion euros of debt.

WEAK CASH

Along with domestic peers such as Carrefour and Auchan, Casino faces intense price competition in its home market as well as challenges from online players such as Amazon.

Pre-IFRS 16 accounting rules, operating profit from retail operations in France alone reached 517 million euros, a rise of 4.9%, which was in line with a lowered 5% guidance Casino had provided in January.

“Trading profit of 4.9% was behind the guided 10% at the start of the year and free cash flow of 367 million euros was well behind the guided 500 million euros,” Bernstein analysts said in a note.

On the positive side, Casino said that like other food retailers it faced “unprecedented demand, both in stores and for Drive or home delivery services” due to the coronavirus which has led to a lockdown in many countries.

In France, demand in large cities was particularly high in convenience stores and on E-commerce sites like Casino’s C-Discount unit .

$1 = 0.9168 euros Reporting by Dominique Vidalon; editing by Jason Neely and Nick Macfie

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