NEW YORK — Fitch Ratings has assigned a “BBB” rating to Mexico City-based Grupo Bimbo S.A.B. de C.V.’s proposed $500 million senior unsecured notes issuance due in 2049. Proceeds from the issuance are expected to be used by Bimbo to buy back a portion of its $800 million unsecured notes that mature in 2020, Fitch noted.
In issuing its rating, Fitch pointed to several key drivers, including Bimbo’s strong business position as a leader in the baked foods industry, good geographic diversification, projected moderate revenue growth, stable profitability and leverage strengthening.
“Bimbo has good geographic diversification with around 66% of its total revenues and 44% of its total EBITDA generated from operations outside Mexico,” Fitch said. “Its acquisitions in the U.S., Canada and Europe have provided access to hard currency revenue and EBITDA generation. This has helped the company to counterbalance the exposure between mature and emerging economies. In 2018, Bimbo concluded the acquisition of Mankattan Group in China and acquired some relatively small bread producers in Chile, Colombia and Peru that complement its operations in the region.”
Fitch said it expects Bimbo’s consolidated revenues to grow approximately 3% and 4% in 2019 and 2020, respectively, boosted by organic growth of key brands, pricing initiatives in U.S. operations and the effect of acquisitions in Asia and Latin America. Headwinds identified include weak private label volumes in the United States, a slowdown in economic growth in Mexico, a tough macroeconomic environment in Argentina and challenging operations in Brazil.
EBITDA margin at Bimbo is expected to stay relatively stable at around 11% in 2019 and 2020, Fitch said. The ratings agency said the company should be able to offset pressures from main raw materials, energy, freight costs in the United States and continued restructuring charges through projected revenue growth, internal efficiencies and lower expenses.
Fitch did note that it expects Bimbo to maintain neutral to slightly negative free cash flow (F.C.F.) in 2019.
“Fitch estimates the company will generate in 2019 around 15.8 billion pesos of cash flow from operations (C.F.F.O.) to cover capex of 13.8 billion pesos and dividends of 2.1 billion pesos,” Fitch said. “Despite a projected growth of close to 7% in EBITDA in 2019, Bimbo’s C.F.F.O. is expected to be pressured by higher requirements of net working capital. Positive F.C.F. should resume in 2020.” (On Sept. 5 Bimbo announced it had priced $600 million of the 4% notes.)