Fitch Ratings has affirmed Alicorp S.A.A.'s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BBB' and senior unsecured notes at 'BBB.'
The Rating Outlook on the corporate ratings is Stable.
The affirmation reflects Alicorp's resilient business profile amid Peru's economic recovery. The Stable Outlook reflects Fitch's expectation that the company has adequate financial flexibility to refinance its upcoming debt maturities.
Key Rating Drivers
Solid Business Profile: Alicorp has a broad, geographically diverse product portfolio, providing resilience and growth prospects while smoothing cash flow volatility. It focuses on consumer goods, namely Food and Home & Personal Care Products (56% of EBITDA as of September 2024); B2B (foodservice and bakery; 22% of EBITDA); and Aquaculture Feed (12% of EBITDA) mainly in Ecuador and Chile.
Alicorp maintains a leading position in several categories across its portfolio, including edible oils, pasta, sauces, laundry care, and industrial baking flour. Fitch believes Alicorp's Peruvian operations are the backbone of the group due to the company's strong market position in the country's consumer products industry, leading brands, broad product portfolio, and extensive distribution network.
Acquisitions and Divestitures Strategy: Fitch considers the divestiture of Alicorp's crushing business and the acquisition of Refineria del Espino S.A. (Grupo Palmas) in Peru, which closed in 2024, as neutral to its credit quality. The net effect of these transactions was not material, as the additional debt to fund the acquisition was partially offset by debt reduction from the divestiture.
Alicorp announced in December 2024 that it had reached an agreement to acquire full equity ownership of Jaboneria Wilson S.A. in Ecuador; Disanu S.A.C. in Peru; and Sanuss S.A.S. in Colombia. The acquisitions are expected to be completed by mid-2025. Fitch believes these transactions are part of the company's growth strategy to strengthen its regional footprint and product portfolio.
Leverage Decreasing: Fitch projects Alicorp's net leverage will be between 2.0x and 2.5x in 2024-2026. This incorporates the acquisitions and divestitures, the recovery of EBITDA to levels above PEN1.5 billion, and share repurchases of PEN1.4 billion. Fitch also estimates Alicorp's net debt will be about PEN3.6 billion and considers the potential bolt-on debt-financed acquisitions manageable at the current rating level. For the LTM as of September 2024, the company's total debt and net debt was PEN5.5 billion and PEN3.8 billion respectively.
Higher EBITDA Margin: Fitch projects that Alicorp's EBITDA margin will be around 13% in 2025-2026, including the acquisitions and divestitures. During 2024, Alicorp's EBITDA margin gradually recovered despite a challenging business environment, due to a better sales product and channel mix and a more favorable commodities cost environment. The company's leveraged core brands and traditional channels in its consumer goods business in Peru, Bolivia, and Ecuador, improving profitability. Fitch expects that EBITDA margins for Alicorp's B2B and Aquafeed businesses will remain relatively stable.
Positive FCF: Alicorp is expected to maintain its capacity to generate positive FCF over 2024-2026. The company's cash flow generation is projected to benefit from positive net working capital requirements, resulting in an estimated CFO of around PEN1.1 billion in 2024. With an estimated capex of PEN307 million and no dividends, Fitch projects FCF of around PEN800 million for 2024. Normalization of FCF is expected by 2025-2026 to annual levels of around PEN400 million, assuming a capex-to-revenues margin of 3%.
Derivation Summary
Alicorp's ratings is moderately sized and has a less diversified portfolio of products and brands compared with other large consumer and packaged goods companies. These include Nestle SA (A+/Stable) and Grupo Bimbo, S.A.B. de C.V. (BBB+/Stable), which have global presences in developed and developing markets.
Key Assumptions
Comparable revenues declining mid-single digits in 2024 and recovering to 5% in 2025-2026.
EBITDA margins averaging around 13% in 2024-2026.
Capex to revenues margin around 3% in 2024-2026.
Equity repurchases of PEN1 billion in 2024 and PEN430 million in 2025.
Divestiture and acquisitions in 2024 and 2025.
RATING SENSITIVITIES
Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade
Net debt/EBITDA sustained above 3.0x as a result of a decline in operating performance or cash flow generation associated with adverse market conditions or acquisitions;
A contraction in consumer goods business in Peru.
Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade
Net debt/EBITDA below 1.5x on a sustained basis;
Increased geographic diversification in investment-grade countries.
Liquidity and Debt Structure
As of Sept. 30,2024, Alicorp had PEN1.7 billion in cash and cash equivalents and short-term debt of PEN1.5 billion. In addition, the company has available committed and uncommitted credit lines of USD120 million and USD1.8 billion, respectively. Fitch believes that Alicorp has the financial flexibility to refinance its upcoming debt maturities due to its good access to capital markets and bank loans.
Issuer Profile
Alicorp produces consumer goods, industrial products, and animal nutrition. It has four core areas: Consumer Products in Peru, Ecuador, Colombia, and other countries; B2B Products; Aquaculture; and international operations focused on food and home care products in the Andean Region.
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Click here to access Fitch's latest quarterly Global Corporates Macro and Sector Forecasts data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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