Fitch Ratings has published Grupo Nutresa S.A.'s 'BBB' Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs).
The Rating Outlook is Stable.
The ratings consider the robustness of Grupo Nutresa's business profile based on its competitive positioning in the markets where it operates. The ratings also consider the strength and recognition of Grupo Nutresa's brands and broad geographic diversification, which allow it to maintain stable cash flows.
The company's capital structure reflects the maintenance of low leverage and debt maturities distributed over the long term. This gives the company greater financial flexibility and ability to continue growing organically and inorganically. The company is exposed to volatility in raw material prices and exchange rates, which is mitigated with hedging and pricing initiatives.
Key Rating Drivers
Robust Competitive Position: Grupo Nutresa maintains a solid competitive position in the Colombian food industry, where 59% of its income was concentrated during 2023. The company is a leader in the country, with 50.2% market share. By segment, it has a participation of close to 50% in cold cuts, chocolate, biscuits, milk modifiers and roast and ground coffee. Together, this represented more than 65% of the group's consolidated EBITDA.
Grupo Nutresa's competitive positioning is supported by the strength of its highly recognized brands, capacity for innovation and its extensive distribution system in Colombia. The company also has significant market positions internationally as the number 1 or 2 in some segments in several countries, especially in Chile and Mexico where its market share for Instant Cold Beverages is 61.9% and 35.8%, respectively.
Sustained Operational Performance: Over the last four years, Grupo Nutresa's revenue CAGR has been 17.38%, due to solid pricing strategies and relative stability in sales volumes in all regions. In 2023, volumes in Colombia were affected by healthy taxes, which applied to ultra-processed foods that make up 30% of the company's portfolio. Fitch's base case projection estimates that by 2024 volumes will remain slightly affected in both the local and international markets due to moderation of consumption.
Grupo Nutresa's gross margins are affected by the volatility of raw material prices. Through hedges, the company mitigated these risks and, in conjunction with expense controls, maintained its profitability margin in 2023. Fitch expects profitability to improve going forward due to the more stable environment for raw materials.
The company has undertaken strategies to implement efficiencies that would lighten its cost structure. Fitch projects EBITDA (after adjustments for IFRS 16 defined by Fitch) to approach 13% in the medium term and COP3,0 trillion.
Solid Credit Metrics: Grupo Nutresa has maintained a solid financial profile, characterized by low leverage and debt maturities distributed over time. At the end of 2023, gross adjusted leverage was 2.3x and net adjusted leverage was 1.8x. FCO generation has been sufficient to fund capital investments and pay dividends. FCF has been consistently positive, except in 2022, when working capital requirements put pressure on cash flow, due to increases in raw material prices. Fitch expects that the company's leverage will remain under 2.0x in the coming years and FCF will also remain positive with a margin over revenues of 1%.
Country Ceiling: Grupo Nutresa is headquartered in Colombia (BB+/Stable), but part of its operational generation is based in the U.S. (AA+/Stable) and Chile (A-/Stable), which accounted for approximately 23% of sales and 21% of EBITDA in 2023-2024). The Long-Term Foreign Currency IDR is not constrained by Colombia's Country Ceiling (BBB-) due to the company's ability to cover hard currency debt service with cumulative cash flow from higher-rated countries such as the U.S., Chile and Mexico.
Favorable Geographic and Product Diversification: The mix of businesses and diversification of its income favors FFO, which has remained stable throughout the economic cycle. In 2023, the FFO was COP968,007 million and is expected to exceed COP1 trillion again in the coming years. Grupo Nutresa continues to make operations profitable in different countries in the region. It has eight business units within the food sector, with exports and direct presence with its own production facilites and distribution centers in 14 countries. International sales represented 41% of the company's total revenue in 2023, and Fitch expects this to continue increasing in the short and medium term. Exports represent about 11% of the company revenues.
Derivation Summary
Grupo Nutresa is the largest producer of packaged foods in Colombia and an important player in the food sector in Latin America, with a robust competitive position, due to its leading brands, broad product portfolio and extensive distribution network. Colombia remains the company's core market and represents about 59% of EBITDA as of 2023.
Factors constraining Grupo Nutresa's ratings include the company's moderate size and a less diversified portfolio of products and brands when compared with other large consumer and packaged goods companies such as Nestle SA (A+/Stable) and Grupo Bimbo, S.A.B. De C.V. (BBB+/Stable), which all have global presences in developed and developing markets.
Grupo Nutresa has a more robust business profile than Alicorp (BBB/Stable) in terms of geographical diversification and by product, with lower leverages. Fitch expects Grupo Nutresa's net leverage to maintains below 2.0x in the coming years and for Alicorp below 3.0x in 2024 based on improving FCF after a weak 2023.
Key Assumptions
Average revenue growth of 9.8% over the rating horizon;
Total volume remains stable in 2024;
Average EBITDA margin of 12.5% (after adjustment for IFRS 16 defined by Fitch);
Average exchange rate of COP4,152 per U.S. dollar;
The projection base case does not incorporate acquisitions;
Capital investment intensity (capex/revenue) of 3.0%;
Dividend payment in line with management's projections.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Net debt/EBITDAR below 2.0x on a sustained basis;
Increased geographic diversification in investment-grade countries;
FCF margin over 3% on a sustained basis.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Lower than anticipated operating performance, including a decline in the company's revenues and margins;
More aggressive growth policy that includes acquisitions financed mainly with debt;
Net debt/EBITDAR above 3.0x on a sustained basis;
Dividend distribution or value extraction mechanisms from the company that pressure leverage and makes the FCF negative on a sustained basis.
Liquidity and Debt Structure
Sound Liquidity Position: At the end of 2023, cash stood at COP967,110 million and current maturities at COP758,669 million. The company has debt maturities distributed over time that give it greater financial flexibility. The interest coverage was 3.8x in 2023, and Fitch expect that it will improve in the coming years with an average of 8.0x, close to historical coverage. Grupo Nutresa has broad access to the local and international financial and capital markets, which provides it with additional liquidity to meet eventual financing needs.
Issuer Profile
Grupo Nutresa S.A. is the leading processed food company in Colombia and one of the most important players in the sector in Latin America. Grupo Nutresa operates through eight business units: Cold Cuts, Biscuits, Chocolates, Tresmontes Lucchetti - TMLUC, Coffee, Retail Food, Ice Cream and Pasta.
Summary of Financial Adjustments
Debt adjusted by leases according to criteria and considering the company has a business retail.
ESG CONSIDERATIONS
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
GRUPO NUTRESA S. A. 
