- Preliminary investment grade rating for new METRO Wholesale & Food Specialist "BBB-/A-3" with stable outlook
- S&P sees a stable market position, moderate improvement in profit margin as well as improved debt ratio as the basis for confirmation
Standard & Poor's (S&P), the international ratings agency, has confirmed a preliminary investment rating of "BBB-/A-3" for METRO Wholesale & Food Specialist, which plans to demerge from the current METRO GROUP in the coming year. A stable outlook is also certified. As such, the credit bureau confirms the intention of METRO Wholesale & Food Specialist to retain an investment grade rating as a company separately listed from the Consumer Electronics business. Therefore, S&P has taken several assumptions and preconditions as a basis. Over recent years, METRO GROUP had reduced its net debt by around EUR 5 billion and has now shown a much more favourable debt ratio.
The S&P specialists base their preliminary assessment on the following positive factors: The market position of METRO Wholesale & Food Specialist is viewed as stable. For 2017 and 2018, S&P estimates that the company will improve its ratio of funds from operations (FFO) to net debt to about 21 to 23%, and that it will strengthen its ratio of free operating cash flow (FOCF) to net debt to around 11% to 12%. Besides these factors the preliminary rating is based on a gradual top line growth on the back of a low like-for-like growth and moderately improved margins.
S&P bases its preliminary ratings on the financial profile of the METRO Wholesale & Food Specialist, as was introduced last week at its Capital Markets Day. On 15 December, the so-called demerger report was published, which outlined in particular exactly how the current METRO GROUP would be separated into independent and strong companies in their respective markets. Furthermore, the combined financial statements for METRO Wholesale & Food Specialist for the previous three financial years were published.
It is planned that the Wholesale & Food Specialist business will operate under the METRO brand after the demerger, with the Consumer Electronics business operating under the CECONOMY brand. On 6 February 2016, the annual general meeting of METRO AG is to vote on this demerger.
The risk profile of METRO Wholesale & Food Specialist is judged to be "satisfactory" by S&P. In particular, the rating agency notes that its number one position in Europe and number two position worldwide, thanks to nationally focused activities, shows a widely diversified spectrum of sales and profits. With activities in 25 countries in Europe and Asia and 21 million customers, METRO Wholesale & Food Specialist profits from a broad geographical, product and service range, it adds. In the Wholesale business, 84% of sales emerged from markets outside of Germany; the company is well-established in numerous markets in Western and Eastern Europe as well as Russia and China, it notes.
It was reported positively that around three quarters of sales in the Wholesale business was contributed by recurring customers. This reflects the strong market position and promises potential for further growth, it adds. S&P also notes that METRO Wholesale & Food Specialist has a particularly strong presence in the so-called "HoReCa" segment, which targets hotels, restaurants, bars, pubs, fast food restaurants, catering companies and cantines. S&P states that METRO Wholesale & Food Specialist generates almost 48% of its Wholesale sales in this segment.
The METRO Wholesale & Food Specialist Group is an internationally leading specialist in wholesale and food retail. With its sales lines METRO Cash & Carry and Real as well as its other associated companies, METRO Wholesale & Food Specialist Group operates in 35 countries and employs more than 150,000 people around the world. In 2014/15, METRO Wholesale & Food Specialist Group achieved sales of around €37 billion. The company provides custom solutions to meet the regional and international needs of its wholesale and retail customers.