Fitch Ratings affirmed the long-term foreign and local currency issuer default ratings (IDRs) of at ‘BBB’ and the senior unsecured notes at ‘BBB’. The rating outlook is “stable.”

The rating affirmation reflects Alicorp’s resilient business profile in a difficult economic and political environment along with management’s emphasis on preserving a strong liquidity position, Fitch notes.

The Stable Outlook reflects Fitch’s expectation of a recovery in Alicorp’s leverage profile driven by strong FCF generation in 2024.

Likewise, he points out that a recovery in Alicorp’s EBITDA is expected in 2024 after a weak 2023.

Alicorp’s sales and profitability in its Consumer Goods business in Peru have been impacted in 2023, in part due to a weak economic environment in the first half of 2023.

“The company has addressed its channel issues by repositioning brands with an increased focus on improving profitability at the unit level, which Fitch expects to result in a recovery of gross margins in the second quarter of 2023 close to pre-pandemic levels in the Business Unit. “Fitch expects the positive momentum to continue”says the rating agency.

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The company has also faced a significant headwind to its EBITDA in 2023 due to the weak performance of its milling business, which has been largely affected by weak raw material prices.

Fitch expects a modest recovery in the milling business in 2024 based in part on more favorable trends in raw material prices.

In 2024, Fitch expects the positive momentum in results from a stronger second quarter to continue across the business, with a return to modest positive total volume growth driven by improvements in the Peruvian Consumer Goods and Aquatic Foods businesses along with with a partial recovery of margins. As a result of these factors, Fitch forecasts that adjusted EBITDA (after leases) will grow to around S/1.2 billion in 2024, up from approximately S/1 billion in 2023.

“Peru remains the company’s primary market and represents around 63% of LTM EBITDA as of September 2023, while the company has grown both organically and inorganically to increase its geographic diversification in South America,” point.

“Factors limiting Alicorp’s ratings include the company’s moderate size and a less diversified portfolio of products and brands compared to other large consumer and packaged goods companies such as Unilever PLC (A/Stable), Nestlé SA (A+ /Stable) and Grupo Bimbo, SAB De CV (BBB+/Stable), all of which have a global presence in developed and developing markets”he adds.

Finally, Fitch notes that Alicorp’s leverage metrics are currently high for the rating category. He expects the company’s net leverage to improve to below 3.0x in 2024 based on improving FCF after a weak 2023.

The company also has some exposure to higher risk countries such as Ecuador and Bolivia, which have sovereign ratings of ‘CCC+’ and ‘B-‘, respectively.



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