Fitch Ratings has affirmed
The agency has also affirmed the Long-Term Foreign-Currency IDR of BFG's offshore subsidiary,
Fitch rates BFG according to our government-related entity (GRE) criteria with a score of 30 points based on the
Key Rating Drivers
Solid Support, Strong Control: We assess BFG's support record as 'Strong' due to the
Strong Default Implications: Fitch assesses the socio-political implications of a default by BFG as 'Strong' as the company plays a key role in safeguarding the city's staple food supply, and ensuring quality and price stability. It stores all of
A default would result in significant disruption in
Diversified Business Profile: BFG's Standalone Credit Profile (SCP) is assessed at 'bb-' on its strong business profile, with leading market positions in several staple food sectors. BFG's subsidiary,
However, the SCP is constrained by its high leverage, which we expect to remain at 9.0x-9.5x in the next one-two years. BFG's financial profile is mostly dragged down by its property business. We expect the EBITDA contribution from property to decline further after falling to 18% in 2022 from 25% in 2021, as we expect the company to focus on deleveraging and expanding its other core business segments, where performance remains stable. BFG's financial profile, excluding the property segment, is much stronger, with net debt/EBITDA of around 6.0x in 2022.
Strong Parent-Subsidiary Linkage: We rate BFI on a top-down basis, according to our updated PSL criteria based on our assessment of
'High' Operational Incentive: BFI acts as BFG's offshore financing platform and manages the parent's liquidity and financing activities for offshore operating entities. BFI also manages most of BFG's overseas assets. It procures soybeans, beef, lamb, fishery products and wine from overseas to supply BFG's onshore business.
'Medium' Strategic Incentive: BFI accounts for around 40% of BFG's revenue, EBITDA and gross profit. It was the largest revenue and gross profit contributor in 2022 among all BFG's first-tier subsidiaries. We forecast sustainable revenue growth at a low-single digit as most of BFI's assets are in developed markets and therefore not a major driver of BFG's growth. However, these overseas assets add to BFG's geographical diversification and overall competitiveness.
Derivation Summary
A close GRE peer to BFG is
BFG plays a pivotal policy role in storing
Key Assumptions
Fitch's Key Assumptions Within Our Rating Case for the Issuers
BFG:
Revenue growth of 0%, 2%, 3% and 3% in 2023, 2024, 2025 and 2026, respectively;
Operating EBITDA margin of 6.4%-7.4%;
Capex of
No major international M&A in the near term.
BFI:
Revenue growth of -2%, 2%, 1% and 1% in 2023, 2024, 2025 and 2026, respectively;
Operating EBITDA margin of 6.6%-7.2%;
Capex intensity to remain at around
RATING SENSITIVITIES
BFG
Factors that could, individually or collectively, lead to positive rating action/upgrade
An upward revision in Fitch's internal assessment of the creditworthiness of the
Strengthening of likelihood of support from the
Factors that could, individually or collectively, lead to negative rating action/downgrade
A lowering of Fitch's internal assessment of the creditworthiness of the
Weakening of likelihood of support from the
BFI
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Upgrade of BFG's ratings;
Evidence of strengthening linkages between BFG and BFI.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Downgrade of BFG's ratings;
Evidence of weakening linkages between BFG and BFI.
Liquidity and Debt Structure
Adequate Liquidity: BFG's cash and cash equivalents totalled
BFI on a consolidated basis held around
Issuer Profile
BFG is a wholly state-owned enterprise under the Shanghai SASAC. The group's core business is food product supply, including farming, processing and manufacturing of dairy, sugar, meat, grains, oils and vegetables, and retail and distribution, including supermarkets. It is also engaged in real-estate, logistics and finance businesses.
BFI is a fully owned subsidiary of BFG that was established in 2011. BFI's businesses include the production of red meat, dairy and olive oil. It also deals in wine and distributes packaged food. It has operations in
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
Public Ratings with Credit Linkage to other ratings
BFG's ratings are derived from Fitch's internal assessment of the creditworthiness of
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.
(C) 2024 Electronic News Publishing, source