News Milk
Credit rating agency mild for FrieslandCampina
FrieslandCampina has again received a better than expected credit report. This time from Standard & Poor's. In March there was already an assessment of Fitch, which was also not disappointing for the cooperative dairy group.
Read this article?
Become a subscriber and get instant access
Choose the subscription that suits you
The better-than-expected factor in S&P's assessment is mainly that the company has the so-called 'rating' kept stable, just like Fitch did. From a financial point of view, FrieslandCampina is well on track, according to the credit rating agency: there are threats, but also opportunities. When weighed against each other, the perspective for the company is reassuring, according to the overall summary.
More turnover
S&P expects sales to increase by 1 to 3% this year, while next year sales growth of 2 to 4% is expected. The latter is due to price increases that have been and will be implemented this year, especially for specialized food and new products. According to S&P, there are several new product introductions in the pipeline.
However, there are also threats, due to the negative demographic trend in China (fewer babies) and a weaker economy. Inflation, higher wages and marketing costs also put pressure on results.
Restructurings to further optimize the company and adapt to changing circumstances will also cost money over the next two years. Between €400 and €500 million per year will be allocated for all of this over the next two years.
More working capital
On the other hand, due to decreasing inventories, more working capital will become available, which is more than sufficient for the current needs. S&P believes that there is still enough money left for acquisitions. Not large ones, but acquisitions that cost up to around €50 million annually. Turnover may grow slightly in the coming years, but by 2025 it will not exceed approximately €15 billion. Profitability will be slightly lower this year than last year, but some improvement is expected after that.
S&P is also looking with some concern at government plans regarding dairy farming, which is expected to cause a decline. However, according to the credit rating agency, this effect can be effectively absorbed by attracting more new farmers. S&P does not see why this would be difficult. Fitch seemed there in March to look at it in a more nuanced way.