15:39 | New York (U.S.), May. 23.
Fitch Ratings has affirmed the Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) of InRetail Pharma S.A. (InRetail Pharma) at 'BB+'.
Fitch has also affirmed the senior unsecured bond issued by
InRetail Pharma at 'BB+'. In addition, the rating outlook is stable.
"The ratings reflect InRetail Pharma's strong credit linkage with its parent company, InRetail Peru Corp. (InRetail Peru), and the consolidated credit profile of InRetail Peru and the solid business positions of its supermarket, pharmacy and shopping mall subsidiaries," it said.
The stable outlook reflects Fitch's expectation of deleveraging by
InRetail Peru through 2020.
Key rating drivers include strong parent/subsidiary credit linkage, manageable parent company leverage, pharmacy's strong market position, improvement in Pharma margins, Pharma business deleveraging, and manageable FX risk.
Derivation Summary
InRetail Peru's consolidated financial profile is a key credit driver for InRetail Pharma's ratings due to the strong parent-subsidiary linkage.
"InRetail Peru is well positioned relative to its regional peers in the Peruvian market due to its diversified business profile, with activities in food and pharmacy retail and shopping malls, as well as its solid competitive position in each business segment," the credit rating agency said.
Fitch considers InRetail Peru's scale and geographic diversification weaker compared with regional peers such as S.A.C. Falabella (BBB+/Stable), Cencosud S.A. (BBB-/Stable) and El Puerto de Liverpool, S.A.B. de C. (BBB+/Stable).
In addition, it views InRetail Peru's net adjusted leverage of 4.5x as weaker than Falabella's 3.8x and El Puerto de Liverpool's negative 0.1x and stronger than Cencosud's 4.8x as of Dec. 31, 2018.
On the other hand, Fitch anticipates InRetail Peru will manage its net adjusted financial leverage (measured as net adjusted debt to EBITDAR ratio) in the 4.5x to 3.5x range during 2019-2020, trending to levels around 3.5x by the end of 2020.
Deleveraging is expected from increasing cash flow generation, resulting from synergies in the Pharma business and from new real estate projects starting operations.
InRetail Pharma's 'BB+' ratings also incorporate the company's leading position and increasing market share in Peru's growing drugstore/retail pharmacy segment.
The company's expected positive FCF provides adequate financial flexibility to absorb the 2018 Quicorp acquisition while managing its balance sheet.
InRetail Pharma benefits from share gains in its Peruvian retail pharmacy business, which accounts for approximately 70% of total company sales, with a market share position of approximately of around 47% of total units sold in the Peruvian retail pharmacy industry.
Compared with peers in the U.S. market, InRetail Pharma has significantly smaller scale than Rite Aid Corporation (B/NO), GNC Holdings, Inc. (B-/NO); and, Walgreens Boots Alliance, Inc. (BBB/Stable), which is somewhat compensated for by InRetail Pharma's solid, leading market position and its operating in a lower competitive environment.
Fitch views the company's expected 2019-2020 credit metrics including margins, liquidity, net adjusted leverage and FCF generation as stronger than those of Rite Aid and GNC Holdings.
Editor's note: Based on information provided by Fitch Ratings.
(END) NDP/RMB/MVB
Published: 5/23/2019