Fitch Affirms The Central America Bottling Corp's Ratings; Outlook Stable
MONTERREY, Mexico -- January 25, 2013
Fitch Ratings has affirmed the following ratings of The Central America
Bottling Corporation (CBC):
--Foreign currency long-term Issuer Default Rating (IDR) at 'BB+';
--Local currency long-term IDR at 'BB+';
--USD200 million senior notes due 2022 at 'BB+'.
The Rating Outlook is Stable.
CBC's ratings are supported by the company's long track record of operations
as an anchor bottler of PepsiCo system in Central America and the Caribbean,
diversified product portfolio of leading beverages brands across its
franchised territories, and broad distribution network. The ratings also
benefit from the company's good operating performance, characterized by
positive and stable cash flow generation, and solid credit metrics. In
addition, the company has the implied operative and technical support of
PepsiCo that owns an 18% of its equity.
CBC's ratings are constrained by strong competition within the beverage
industry, the volatility in the cost of its main raw materials which pressure
the company's margins and some exposure of cash generation to low rated
CBC's ratings incorporate the acquisition of a majority (50%+1) equity
interest in the operations of Grupo Tesalia, which is the only bottler of
PepsiCo products in Ecuador. The acquisition was closed in May 2012 and the
CBC paid in cash around USD78 million and assumed USD59 million of net debt.
Grupo Tesalia's expected annual revenues and EBITDA in 2012, assuming full
year operations, are approximately USD184 million and USD22 million,
respectively. On a pro forma basis, Fitch estimates CBC's total net debt to
EBITDA should be around 2.5 times (x) at the end of 2012.
CBC's credit metrics remain solid for the rating category. For the LTM ended
Sept. 30, 2012, the company's EBITDA to gross interest expenses was 3.4x,
while adjusted leverage ratio measured as total debt plus preferred capital to
EBITDA was 3.6x and adjusted net debt to EBITDA was 2.4x. CBC's total adjusted
debt reached USD335 million, out of which USD4 million were related to
preferred capital. Fitch expects that CBC will gradually decrease its gross
adjusted leverage ratios to levels around 2.0x in the mid-term.
Fitch anticipates that CBC's margins should gradually improve as a result of
continuous implementation of production and distribution efficiencies, hedge
initiatives in main raw materials, and the consolidation of its operations in
the Caribbean and Ecuador. For the last 12 months as of September 2012, the
company's profitability has been relatively stable with an EBITDA margin
around 9%. In terms of operating performance Fitch expects that CBC will
maintain its positive growth trend. Fitch estimates that the company's volume,
revenues and EBITDA (measured as operating income plus depreciation and
amortization) have increased approximately 28%, 19% and 12%, respectively,
when compared to last year same period.
Fitch expects that the company cash flow generation to be negative in 2012 as
a result of the acquisitions executed. Excluding this effect, CBC continued
generating stable free cash flow (FCF, defined as cash flow from operations
less capital expenditures and dividends) of approximately USD22 million for
the last 12 months as of Sept. 30, 2012. Planned capital expenditures of
around USD90 million in 2013 could limit FCF generation.
CBC's liquidity position is adequate with USD107 million of cash and
marketable securities and USD52 million of short-term debt. The company has
refinanced the short term debt during the last quarter of 2012 and does not
face significant maturities in the following years.
Factors considered positive to credit quality include a combination of better
operative results, stronger cash flow generation from higher rated countries
and solid credits metrics on a sustained basis. The ratings could be
negatively pressured by a deterioration of the company's capital structure
resulting in higher debt and leverage ratios, as well as a decline in its
operating results due to adverse market conditions.
Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology', Aug. 8, 2012.
Applicable Criteria and Related Research:
Corporate Rating Methodology
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