Fitch Ratings has affirmed the 'AAA(mex)' National Scale Long-Term and Senior Unsecured Debt Rating of GMexico Transportes, S.A.B. de C.V. (GMXT).

Fitch has also affirmed the Long-Term Foreign Currency (FC) and Local Currency (LC) Issuer Default Ratings (IDRs) of GMXT's 74% owned subsidiary, Grupo Ferroviario Mexicano, S.A. de C.V. (GFM) at 'BBB+', and the 'AAA(mex)' National Long-Term and Senior Unsecured Debt ratings of GFM's wholly owned subsidiary, Ferrocarril Mexicano, S.A. de C.V. (Ferromex).

The ratings consider the companies' dominant position in the Mexican railway industry, their revenues diversification from multiple industries, high profit margins, healthy liquidity position and conservative capital structures.

The Rating Outlooks for GMXT, GFM and Ferromex remain Stable.

Key Rating Drivers

Strong Business Profile: GMXT is the leading railway company in Mexico with a market share of around 65%. This compares with the next largest domestic competitor, Kansas City Southern (KCS; BBB/Stable), which has around 31% of market share. Railroad transportation has low penetration in Mexico and significant potential for growth, with trucks accounting for 74% of transportation and rail accounting for 26%.

Competition with other means of transportation is generally based on price, as well as on the quality and reliability of the service provided. Other factors affecting competition are delivery time, security and capacities. Ferromex has the advantages of having the longest railroad system in Mexico, with a strategic transportation position for a wide variety of industries and access to the United States and Canada via the border, as well as the rest of the world via ports. GMXT's customers are diversified, with no single sector accounting for more than 28% of its sales and no single customer makes up more than 6% of revenues.

Favorable Environment Strengthens Performance: For the LTM as of Sept. 30, 2022, GMXT's revenues grew 8.7% in U.S. dollars (USD), due to a solid demand in most of its segments with a combination of increased volumes and tariffs. Growth was driven mainly by the industrial and mineral sectors, with important contributions also in the Intermodal and Chemical sectors. These sectors have benefited from the pandemic and continue to show a positive trend.

Fitch expects an average revenue growth of around 5% by 2025, driven by sectors that continue to perform favorably, such as Industrials and Energy, and some potential recovery in others, such as Agriculture and Automotive. Revenue growth may moderate from previous years as a result of a possible mild recession in the United States resulting in a more restrictive business environment.

Rating Linkage: Fitch equalizes the ratings of GFM with GMXT through its Parent and Subsidiary Linkage Criteria. Fitch uses the stronger subsidiary path outlined in its criteria to analyze the relationship between GFM with GMXT, resulting in a view that the consolidated credit profile is aligned with GFM's 'BBB+' FC and LC IDRs. The consolidated rating approach to the credit ratings of GFM and GMXT reflect the absence of legal ring fencing, as well as open access and control of GFM's cash by GMXT with strong operational and strategic incentives.

A downgrade of Grupo Mexico's rating would impact the rating of GMXT, because there is no legal ring fencing between Grupo Mexico and GMXT and it there would be no practical impediments to Grupo Mexico's access and control of the company, including the dividends GMXT distributes. GMXT accounted for approximately 16% of Grupo Mexico's consolidated EBITDA during the LTM.

Strong Leverage Profile: Fitch expects total adjusted debt/EBITDAR at GMXT to be below 2.0x over the rating horizon. Declining leverage is expected to be driven by the amortization of debt according to the repayment schedule, as well as the growth and efficiency of its operations as continued benefits from implementing precision scheduled railroad, which entails improving operating efficiency by reducing train starts and better utilizing assets improving train length and speed.

Additionally, the company is currently implementing a multiannual strategy to update some locomotives to use liquefied natural gas that will generate more efficiencies in terms of fuel consumption costs.

Solid Cash Flow Generation: The transportation division of Grupo Mexico has historically exhibited strong cash flows before dividends, which Fitch expects to remain over the rating horizon. Upcoming investments in 2023 are focused primarily on maintenance (around 50%) including rail renovation, locomotives, bridges and tunnels rehabilitation. The growth CAPEX will include important strategic projects, such as railroads, intermodal terminals and investments for the acquisition of rail cars and containers. Fitch projects the FCF of GMXT and its subsidiaries to be negative for 2022 and 2023 mainly by higher dividends and CAPEX respectively, and turn positive for the remaining of the forecasted period.

Derivation Summary

The ratings of GMXT and subsidiaries reflect their strong business profile as leaders in the railroad market in Mexico, as well as their solid credit profile. GMXT is well positioned compared to other class one railroad companies, which are generally rated in the high 'BBB' to low 'A' categories. Adjusted leverage metrics compare favorably, and are expected to be lower than 2.0x in the rating horizon, compared to KCS (BBB/Stable) at around 3.0x by YE 2024. Like Kansas City, GMXT is geographically concentrated compared with larger peers given its overreliance on trade between the U.S. and Mexico.

Key Assumptions

Fitch's Key Assumptions Within Our Rating Case for the Issuer Include:

Average revenues increase in USD terms of 6% in 2022-2025;

Average EBITDA margin calculated by Fitch around 42% in 2022-2025;

Capex of around 13% of revenues in 2022-2025;

Average dividends of USD420 million in 2022-2025:

Total adjusted debt/EBITDA below 2.0x.


Factors that could, individually or collectively, lead to positive rating action/upgrade:

While Fitch does not foresee any positive rating action over GFM in the medium term on a standalone basis, a positive rating action on Grupo Mexico would lead to an upgrade of GFM's FC IDR and LC IDR. Grupo Mexico's positive rating sensitivities are:

A sustained Net Debt/EBITDA ratio of below 1.0x;

Upgrade of SCC's standalone credit profile to 'A-'.

The Positive Rating Sensitivities for SCC are:

A sustained Net Debt/EBITDA ratio at SCC of below 1.0x;

No material changes to the tax and royalty scheme for miners in Peru;

More favorable environment for greenfield or brownfield copper projects in Peru.

Factors that could, individually or collectively, lead to negative rating action/downgrade:

If GFM's credit profile becomes weaker, the rating would be equalized to GMexico's under Fitch's methodology. A negative rating action on Grupo Mexico would lead to a downgrade of GFM's FC IDR and LC IDR. Grupo Mexico's negative rating sensitivities are:

A sustained consolidated Net Debt/EBITDA ratio of more than 2.0x;

A downgrade of SCC's standalone credit profile to 'BBB'.

The Negative Rating Sensitivities for SCC are:

A sustained Net Debt/EBITDA ratio at SCC of more than 2.0x;

A prolonged deterioration of SCC's low-cost production status and/or copper fundamentals;

A decline in the standalone credit profile of Transportes from 'BBB+' to 'BBB' could also result in a downgrade of GFM's FC IDR and LC IDR.

Best/Worst Case Rating Scenario

International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit

Liquidity and Debt Structure

Strong Liquidity: GMXT maintains strong liquidity with consolidated readily available cash of USD625 million compared to short-term debt of USD160 million as of Sept. 30, 2022. As of the same date, around 70% of total debt matures after 2026, with approximately 99% denominated in MXN with 83% of debt at a fixed rate.

The company does not have a dividend payout policy, providing a flexible approach to liquidity during volatile periods and in times of large investments. Fitch expects the company to manage its consolidated adjusted leverage profile below 2.0x with excess cash flow to be deployed for capex and dividends. Fitch would expect Grupo Mexico to provide its Transportation Division with liquidity assistance in the form of lower dividends, capex requirements or other tangible resources, in the event that it is required.

Issuer Profile

Through GFM's subsidiary, Ferromex, GMXT owns the largest railway system in Mexico. With a network of 7,120 kilometers, it covers approximately 71% of the national territory. The company connects to five border crossings with the United States and has access to four ports on the Pacific Ocean and four on the Gulf of Mexico. The indirect subsidiary, Texas Pacifico, has 616 kilometers of network, which extends from the U.S.-Mexico border at Ojinaga-Presido to the San Angelo intersection, and provides a key strategic cross-border presence for Grupo Mexico's extensive rail transportation network. GMXT's indirect subsidiary FEC (Florida East Coast Railroad) owns 565 kilometers of track along Florida's east coast from Jacksonville to Miami.


The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This 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. For more information on Fitch's ESG Relevance Scores, visit

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