Mexico City / MX. (bw) Fitch Ratings has assigned Grupo Bimbo S.A.B. de C.V. a long-term Foreign Currency Issuer Default Rating (IDR) of «BBB» and a Local Currency IDR of «BBB». In addition, Fitch currently carries the following ratings for Bimbo:
- National scale long-term rating at «AA+(mex)».
- Local Certificados Bursatiles issuances «BIMBO 02-2», «BIMBO 09»,
«BIMBO 09U» y «BIMBO 09-2» at «AA+(mex)».
- The Rating Outlook is Positive.
The ratings are based on the company´s leadership position in the global bakery business, strong brand recognition and positioning in the markets where it operates and its extensive distribution network, which allows it to reach over 1’000’000 points of sale through more than 39’000 sales routes. The ratings also incorporate its improved business profile and geographic diversification, as revenues and Ebitda from the U.S. market now represent 42 percent and 36 percent, respectively.
The ratings also consider the strengthening of the company´s financial profile, supported by the successful integration of the Weston Foods acquisition, good operating results over the past 12 months, important reduction in debt levels, and a better liquidity position.
The Positive Outlook reflects Fitch´s expectation that Bimbo will continue with its de-leveraging strategy in the near-to-medium term and that it will reach its total debt to Ebitda target of 1,5 times over the next 18 months, supported by significant cash generation. Fitch believes the company will strengthen its financial flexibility by using available free cash flow toward debt reduction.
While the ratings take into account the stability of the packaged food sector, they also incorporate risks such as the exposure to volatility in commodity prices and changes in dietary trends away from high carbohydrate foods.
Bimbo´s operating results during the past twelve months have remained strong even while the economic environment has remained challenging. Although revenue growth was modest, profitability improvements helped drive Ebitda higher. Furthermore, the integration process of the Weston Foods operations has been smooth and efficient, and expected savings from synergies are now higher than initially projected.
In terms of profitability, Ebitda margins for the last twelve months (LTM) ended March 31, 2010 were 14,1 percent, which compares favourably with twelve percent margins for the same period a year ago. This improvement is mainly derived from positive results from efficiency projects implemented in the Western U.S. territory, the integration of Weston´s more profitable operations into results, lower commodity prices and the favourable effect of exchange rates on the company´s cost structure. For the LTM ended March 31, 2010, Bimbo generated 16,6 billion MXN (approximately 1,3 billion USD of Ebitda) and 13 billion MXN (approximately one billion USD) of funds from operations (FFO).
Since the closing of the Weston acquisition in January 2009, Bimbo has been able to pre-pay 535 million USD in debt, even though it faced a challenging operating environment. Total debt as of March 31, 2010 was 35 billion MXN (approximately 2,7 billion USD), with a cash balance of 4,9 billion MXN (approximately 386 million USD). Leverage at the end of the first quarter of 2010, as measured by total debt to LTM Ebitda was 2,1 times, compared to pro-forma leverage of close to 3,0 times at the time of the transaction. Interest coverage ratio for the same period was 5,7 times, consistent with the category. Bimbo´s credit protection measures should continue to strengthen in the short-to-medium term given management´s intentions to continue to use excess cash flows toward debt reduction.
Liquidity risk is moderate. The company was able to refinance all of its short-term maturities related to the acquisition during 2009. At March 31, 2010, short-term debt was 3,4 billion MXN (approximately 269 million USD), which represented 9,8 percent of total debt, compared with a cash balance of 4,9 billion MXN. Bimbo faces no significant maturities during 2010 and 2011, although in 2012 it faces the maturity of one billion USD in bank debt. Management plans to refinance a portion of this debt; there should be no problems refinancing these maturities given the company´s good access to diverse funding sources.
Bimbo´s debt profile is well-balanced between US-Dollar- and Mexican-Peso-denominated debt. At March 31, 2010, the company had 36 percent of its total debt denominated in US-Dollars and 64 percent denominated in Mexican Pesos. Considering that the company generated 36 percent of its Ebitda in the U.S., this cash flow eliminates a good portion of currency fluctuation risk. The company has 51 percent of its debt at fixed rates and 49 percent at floating, with an average cost of debt of 6,8 percent.
About: Grupo Bimbo S.A.B. de C.V. is one of the largest baking companies in the world and the largest food company in Latin America. With more than 98 plants and 600 distribution centers located in 17 countries in America, Europe and Asia, Bimbo is dedicated to the manufacture, distribution and sale of a range of over 7’000 products such as sliced bread, biscuits, cakes, tortillas, salted snacks and sweets, among others, which are marketed under more than 100 different brands (Bimbo, Marinela, Tia Rosa, Mrs. Baird´s, Oroweat, Barcel, Ricolino, and others) through its extensive distribution network (more than 39’500 routes reaching more than 1,5 million points of sale). During 2009 the company had sales of 119,3 billion MXN and generated Ebitda of 16,2 billion MXN. Mexico accounted for 48 percent and 58 percent of these, respectively. In Mexico, the company is a leader in the bakery industry, and ranks 2nd in the markets for salty snacks, cookies and candy.