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I AGREE
04 Jul 2019
Buenos Aires City, July 04, 2019 -- Moody´s Latin America Agente de Calificación de Riesgo S.A.,
(Moody´s) has upgraded Quickfood S.A.'s guaranteed
senior unsecured notes' ratings to B1/Aa3.ar from B2/A2.ar
following the upgrade of the guarantor's ratings, Marfrig
Global Foods S.A. (Marfrig, B1 stable), to B1
with stable outlook on July 4, 2019. At the same time,
Moody's has affirmed Quickfood's corporate family rating (CFR)
at B3/Baa2.ar. The outlook is stable.
Upgrades:
..Issuer: Quickfood S.A.
....Gtd Senior Unsecured Regular Bond/Debenture,
Upgraded to B1/Aa3.ar from B2/A2.ar
Affirmations:
..Issuer: Quickfood S.A.
....Corporate Family Rating, Affirmed
at B3/Baa2.ar
RATINGS RATIONALE
The upgrade to B1/Aa3.ar of Quickfood's guaranteed notes mirrors
the rating upgrade to B1 from B2 of its guarantor, Marfrig,
by Moody's Investors Service on July 4, 2019. Marfrig fully
and unconditionally guarantees the instruments, which would cause
an acceleration of most of the parent's debt in the event of a default.
For more information, please see "Moody's upgrades Marfrig
to B1; stable outlook" available at moodys.com at https://www.moodys.com/research/Moodys-upgrades-Marfrig-to-B1-stable-outlook--PR_404385.
Quickfood's B3/Baa2.ar CFR continues to reflect its weak credit
and financial profiles, and its modest scale and concentration in
Argentina, with a consequent strong correlation with the country's
macroeconomic environment. Some of its raw materials are commodities
or correlated with them, mainly livestock and trimming, which
add both price and foreign-exchange rate volatility risk.
Quickfood's B3/Baa2.ar ratings incorporate an uplift from its standalone
credit profile because of the support from its parent, Marfrig.
The ratings are also supported by the company's position as one of the
main meat processing companies in Argentina, with high-quality
products and well-recognized brands, such as Paty,
the local leader in the beef hamburger market, and Vienissima,
one of the local leaders in the sausages market.
Quickfood's credit metrics experienced some improvement in late
2018 and in the first quarter of 2019, as a result of (i) a capital
contribution in August 2018 of ARS1 billion ($34 million) by the
company's former parent company, BRF S.A. (Ba2
negative), that was used to pay down short term debt; and (ii)
the triggering of a 'change of control' clause in early March
2019 following Marfrig's acquisition of the company in January 2019,
which led to the repurchase of most of Quickfood's guaranteed notes.
However, we expect Quickfood's debt levels to increase through
the next 12 to 18 months to fund both working capital requirements and
capital spending. Quickfood's profitability improved recently
as a result the company's actions to improve productivity in 2018,
with reported gross margin rising to 11.8% as of the last
twelve months of March 2019 from 8.9% in fiscal-year
2017. But the company continues to derive negative profit at the
operating and the net income levels, resulting in increasingly negative
retained earnings in Quickfood's equity. In recent years,
the company's low or even negative value of equity derived from
high negative retained earnings forced former parent company BRF to strengthen
Quickfood's equity through capital contributions. We expect
the Argentine economic environment (75% of sales derive from the
domestic market) to remain weak in 2019, with real GDP down by about
1.5%, which will continue to prevent the company from
fully passing through higher costs of raw materials (mainly livestock
and packaging) and further expanding gross margins.
The stable outlook reflects our view that Marfrig will continue to support
the company to take advantage of its leading position in the processed
food market in Argentina, as well as its export platform,
given the recent US opening for import of fresh beef. In addition,
we believe Quickfood will benefit from the group's solid business model
and position as one of the largest food conglomerates in the world.
The B1/Aa3.ar rating of the guaranteed notes could be upgraded
or downgraded if Marfrig 's ratings were to be upgraded or downgraded,
respectively.
An upgrade of Quickfood's B3/Baa2.ar CFR could result from continued
strengthening of the company's revenue and profitability, along
with continued improvement in its leverage metrics. Additionally,
a more predictable outlook on the economic activity in Argentina would
be important for a rating upgrade.
A rating downgrade of Quickfood's B3/Baa2.ar CFR could be
prompted if Marfrig's credit profile weakens, or in case of significant
deterioration in Quickfood's operating performance. Indications
of weakening market share in the domestic protein market could also place
pressure on the rating, especially if Quickfood is unable to remain
among the leading protein entities in Argentina
Founded in 1960 and headquartered in Buenos Aires, Argentina,
Quickfood is dedicated to the manufacturing and commercialization of processed,
refrigerated and frozen foods under specific brands. For the last
twelve months ended in March 2019 revenues amounted to ARS9.6 billion
(approximately $307 million). The company operates three
processing plants and two distribution centers in Argentina.
Marfrig Global Foods S.A. (Marfrig), headquartered
in Sao Paulo, Brazil, is the second-largest beef producer
globally, with consolidated revenue of R$36.7 billion
(around $10.0 billion) in the 12 months ended March 2019.
The company has a relevant scale and is diversified in terms of operating
production facilities, with total slaughtering capacity of 33.5
thousand heads per day (including National Beef) through its 24 slaughtering
plants and 12 processing units located in Brazil, Argentina,
Uruguay and the US. In June 2018, Marfrig acquired the control
of National Beef (through a 51% stake), headquartered in
Kansas City, Missouri.
The principal methodology used in these ratings was Protein and Agriculture
published in May 2019. Please see the Rating Methodologies page
on www.moodys.com.ar 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
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Methodology published in May 2016 entitled "Mapping National Scale Ratings
from Global Scale Ratings". While NSRs have no inherent absolute
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For information on the historical default rates associated with different
global scale rating categories over different investment horizons,
please see http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1174796.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating. For provisional
ratings, this announcement provides certain regulatory disclosures
in relation to the provisional rating assigned, and in relation
to a definitive rating that may be assigned subsequent to the final issuance
of the debt, in each case where the transaction structure and terms
have not changed prior to the assignment of the definitive rating in a
manner that would have affected the rating. For further information
please see the ratings tab on the issuer/entity page for the respective
issuer on www.moodys.com.ar.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
For issuers domiciled in Argentina, the regulatory report related
to this rating action is available on www.moodys.com.ar.
Please see www.moodys.com.ar for any updates on changes
to the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com.ar
for additional regulatory disclosures for each credit rating.
Martina Gallardo Barreyro
Asst Vice President - Analyst
Corporate Finance Group
Moody's Latin America ACR
Ing. Butty 240
16th Floor
Buenos Aires City C1001AFB
Argentina
JOURNALISTS: 1 800 666 3506
Client Service: 1 212 553 1653
Marianna Waltz, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 0 800 891 2518
Client Service: 1 212 553 1653
Releasing Office:
Moody's Latin America ACR
Ing. Butty 240
16th Floor
Buenos Aires City C1001AFB
Argentina
JOURNALISTS: 1 800 666 3506
Client Service: 1 212 553 1653
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
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