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FrieslandCampina gets benefit of doubt from S&P
Credit rating agency Standard & Poor's (S&P) gives FrieslandCampina's new strategy the benefit of the doubt and keeps its credit status stable. This year the dairy giant will still suffer from restructuring issues, but it is expected that turnover and profit growth will return in the few years after that.
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Earlier this year, credit rating agency Fitch published a report about FrieslandCampina, where the credit status was also kept stable.
The American credit rating agency is now extending the term not without a fight the existing credit rating (BBB/Stable/A-2). He notes that the results for 2023 have been worse than expected, both in terms of yield development and performance in various markets with strongly fluctuating exchange rates and restructuring costs. In addition to these charges and the costs of a bought-out long-term contract, S&P is also faced with €136 million in severance costs for employees.
Milk supply
And then there is the threat of stricter environmental requirements for FrieslandCampina's member companies, which could threaten the supply base. However, there are also some counterpoints to this. For example, last year's free cash flow was €306 million, a total of €105 million higher than first expected. Furthermore, the company's new business strategy appears to inspire confidence.
S&P believes that not many results will be seen before 2024, but certainly in the following two years. FrieslandCampina is expected to achieve the best results in the Specialized Nutrition and Ingredients divisions. Excellent results are being achieved in the first business unit - particularly in infant nutrition - thanks to good sales of Friso's premium products in China and a limited number of other markets.
Cheese and whey
Also the FrieslandCampina plan to position itself higher in the private label market, especially for cheese is well received by S&P. Another positive point is the investments in high-quality whey ingredients in particular in Borculo.
For 2024, S&P predicts a turnover of almost €12,9 billion, which is slightly lower than the turnover for 2023. Limited turnover growth of 2,6% per year is expected for the three subsequent years, which will reach a turnover of 2027% per year at the end of 14. almost €XNUMX billion.
Better margin, more debt
While the operating margin is slowly increasing, an increasing debt burden is also expected. At the end of last year, the amount was the lowest in a long time, at more than €2,5 billion, but it is expected to increase again to almost €3,7 billion by the end of 2027. That is a fraction more than it was at the end of 2020, at a time when almost €3 billion lower turnover.