Fitch affirms Brasil Foods' BBB- rating
April 5, 2012
by Meat&Poultry Staff
NEW YORK – Fitch Ratings affirmed Brasil Foods’ BBB- rating, and said its outlook for the company is stable.
Fitch based its rating on Brasil Foods’ strong business profile “as one of the largest food and distribution companies in Brazil, moderate leverage and double-digit margins”. The ratings agency added it expects the company to improve profitability and margins based on strong demand for the company’s products and synergies generated from its integration with Sadia.
Fitch added that Brasil Foods will continue to diversify through organic growth and acquisitions, a strategy that will mitigate some of the risks associated with the industry. It will also impact free cash-flow generation in the near term and may result in higher leverage. However, Brasil Foods has a long track record of equity infusions to support the balance sheet while executing its growth strategy, Fitch said.
Despite the risks, the businesses that will remain in Brasil Foods’ portfolio are expected to have a strong performance during 2012 and the EBITDA margin is forecasted to improve as the company realizes further synergies, according to Fitch. Synergies are expected to be as large as R1 billion (US$545,970,284) annually in 2012 and 2013, after investment of R700 million (US$382,179,199) between 2011 and 2013.