Grupo Bimbo credit picture seen brightening

by Josh Sosland
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Grupo Bimbo bakery products - Bimbo bread, Thomas bagels, Sara Lee cake
Moody’s said Grupo Bimbo is "the largest baked-goods company in the world."

MEXICO CITY — Grupo Bimbo S.A.B. de C.V. is poised to continue generating “solid profitability” while maintaining “solid credit metrics,” according to Moody’s Investor Services, Mexico City.

Analysis of Bimbo’s global business was included in a Moody’s affirmation of the Baa2 credit rating of Bimbo. While leaving the credit rating unchanged, Moody’s said the Bimbo credit outlook has improved to stable from negative.

Baa ratings are described by Moody’s as “medium grade” and “subject to moderate credit risk.”

Underpinning the rating, Moody’s said, is Grupo Bimbo’s “position as the largest baked-goods company in the world, with an ample distribution infrastructure in its key markets.”

Sustained free cash flow generation, geographic diversification, effective management and prudent financial policies also are pluses, the agency said.

“The ratings also incorporate the acquisitive strategy of the company, the competitive nature of the markets where it operates, and the challenging environment in its Latin American and European operations,” Moody’s said.

According to Moody’s, Bimbo is the leading baking company in Mexico, where the company enjoys a 26.7% market share, the United States (8.8% share), Canada (14.3%) and Latin America (12.3%).

“In the U.S., Bimbo's largest competitor, Flowers Foods Inc., holds a 4% share,” Moody’s said.

Dempster's Bread, Canada Bread, Grupo Bimbo
In 2014, Grupo Bimbo acquired Canada Bread, which sells products under the Dempster's, Villaggio, POM, Bon Matin, Vachon and Ben's brands.

Since acquiring Canada Bread in 2014, Grupo Bimbo has paid down around $500 million in debt and has seen its  adjusted debt/EBITDA ratio decline to 3.3 times as of December 2015 from 4.4 times as of December 2014.

“While Bimbo has reduced its dollar denominated debt and EBITDA has increased, foreign exchange volatility has affected some credit metrics,” Moody’s said. “We estimate that, on a currency neutral basis, Moody’s adjusted Debt/EBITDA would be around 3.0 times when calculated using dollar figures instead of Mexican peso figures that were affected by the high depreciation of the currency over the last 12 months.”

An upgrade may be possible if the debt/EBITDA ratio approaches 2, Moody’s said.

During 2015, 34% of Bimbo revenues were generated in Mexico, 52% in the United States and Canada, 11% in Latin America, and the 3% balance in Europe, Moody’s said.

In December 2015, Bimbo’s long-term debt maturity profile included $291 million in 2016, $291 million in 2018, $108 million in 2019, $950 million in 2020, $800 million in 2022, $800 million in 2024, and $500 million in 2044.

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