Sao Paulo, October 30, 2015 -- Moody's América Latina has today assigned an A3/ Aaa.br
to Ambev's proposed BRL 1.0 billion senior unsecured debentures
due 2021. The outlook for the rating is stable.
Ratings assigned:
Issuer: Ambev S.A.
- BRL 1.0 billion senior unsecured debentures due 2021:
A3/Aaa.br
The outlook for the ratings is stable.
RATINGS RATIONALE
Ambev's Baa1 (foreign currency), A3 (local currency) and Aaa.br
(national scale) ratings acknowledge its scale as one of the world's largest
brewers, its leading position in large markets, such as Brazil
and Canada, its geographic diversification and a cost-competitive
own distribution network. In Brazil, its dominant position
and execution capabilities will allow it to advance in terms of market
share even in a more challenging macroeconomic scenario. The company's
continued investments in product innovation and marketing, coupled
with prudent cost management and financial strategy, translate into
sound and relatively stable EBITDA margins and very comfortable leverage
and liquidity levels. The rating also reflects the enhanced operating
performance of Ambev's parent company, Anheuser-Bush Inbev
SA/NV (ABI, A2 under review for downgrade).
Offsetting these positive factors are prospects for more subdued volume
growth, given current economic slowdown in some of the countries
where it operates, mainly Brazil. Also, there is a
likelihood of continued high dividend payouts to ABI, although these
are expected to match cash flow generation. The commodity-like
nature and volatility of input costs and Ambev's reliance on effective
hedging strategies are also incorporated in the ratings.
The proposed debentures were rated at the same level as Ambev's
local currency issuer rating (A3/Aaa.br) to reflect the instrument's
seniority, which ranks pari-passu to other instruments existing
within the company's capital structure. Proceeds from the
issuance will be directed towards investments projects to expand capacity.
Pro forma to the transaction, we expect Ambev's leverage to
remain fairly stable at 0.33 times from 0.28 times in the
LTM ended June 2015, which compares very favorably to similarly
rated peers. The issuance will also not change Ambev's liquidity
profile, as cash in hands will still cover short term debt by 7.2
times and total debt by 2.0 times (compared to 2.9 times
at the end of June 2015). Ambev has a strong liquidity profile
for its current level of operations, supported by a conservative
approach to debt and risk, and robust cash from operations,
which amounted to BRL 21.2 billion in the last twelve months ended
June 2015, more than enough to meet its capital expenditures needs
of BRL 4.4 billion and dividends payment of BRL 12.6 billion
in the same period. Including the announced investments we expect
Ambev's capex in 2015 and 2016 to be in-line with last year's
amount.
The stable outlook reflects Moody's expectations that Ambev will continue
to benefit from market growth, further investments in product innovation
and a conservative financial management. Consequently, the
sustained operating margins and matching dividend payout to cash flow
generation will allow it to maintain low leverage and good liquidity.
Ambev's rating or outlook could suffer negative pressure if its overall
operating performance were to deteriorate due to greater than expected
volatility in any of its major markets, or if the company's leverage
were to significantly increase due to a change in capital structure or
a debt-financed acquisition. Furthermore, a decrease
in the coverage of foreign currency EBITDA to foreign currency debt or
a perceived reduction in the company's ability to service foreign currency
debt outside of Brazil would weaken notching considerations and could
prompt a downgrade of the foreign currency ratings. Finally,
a downgrade of ABI's rating, which is under review for downgrade,
by two notches or more would put pressure of Ambev's ratings.
Quantitatively, a downgrade could be considered if EBITA/Interest
fell below 6.0x or debt to EBITDA increased to above 2.0x
on a sustainable basis. (All metrics according to Moody's standard
adjustments and definitions.)
Upward ratings momentum is unlikely and would depend on an improvement
in the national economy of Ambev's main markets and the maintenance of
steady and strong credit metrics.
Headquartered in São Paulo, Brazil, Ambev S.A.
operates in the production, distribution and sales of alcoholic
and non-alcoholic beverages in 16 countries across the Americas.
For the last twelve months ending June 2015, Ambev reported net
sales of BRL 41.5 billion (approximately USD 15.5 billion
at average exchange rates for the period) with EBITDA margin of 48%
in the same period.
Ambev is the largest brewer in Latin America and the world's fourth largest
beer producer in terms of volume, in addition to being PepsiCo's
largest bottler. Its large portfolio includes well-known
brands, such as Skol, Brahma, Stella Artois, Budweiser,
Antarctica, Quilmes, among others, as well as Gatorade,
Pepsi Cola, H2OH! and Lipton Ice Tea, sold under license
from PepsiCo. Since 2004, Ambev has been controlled by Anheuser-Busch
InBev (ABI), a leading global brewer and one of the world's top
five beverage producers.
The principal methodology used in these ratings was Global Alcoholic Beverage
Industry published in October 2013. Please see the Credit Policy
page on www.moodys.com.br for a copy of this methodology.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn" country modifier
signifying the relevant country, as in ".za" for South Africa.
For further information on Moody's approach to national scale credit ratings,
please refer to Moody's Credit rating Methodology published in June 2014
entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings".
REGULATORY DISCLOSURES
Information sources used to prepare the rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's information.
Moody's considers the quality of information available on the rated entity,
obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
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and cannot in every instance independently verify or validate information
received in the rating process.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Please see the ratings disclosure page on www.moodys.com.br
for general disclosure on potential conflicts of interests.
Moody's America Latina, Ltda. may have provided Other Permissible
Service(s) to the rated entity or its related third parties within the
12 months preceding the credit rating action. Please see the special
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Ltda." on our website www.moodys.com.br for
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The date of the last Credit Rating Action was 12/8/2015.
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Erick Rodrigues
Asst Vice President - Analyst
Corporate Finance Group
Moody's America Latina Ltda.
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16th Floor, Room 1601
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Marianna Waltz, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 800-891-2518
SUBSCRIBERS: 55-11-3043-7300
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Moody's assigns a A3/Aaa.br ratings to Ambev's proposed debentures
