Our 'BBB+' issuer and issue ratings on NorgesGruppen ASA (NorgesGruppen) are unchanged following the publication of its fourth-quarter results.
Efficiency measures increase annual EBITDA
NorgesGruppen reported NCR-adjusted EBITDA of NOK 9.7bn for the full year, NOK 700m above our previous forecast. The strong result was partly due to a slower-than-expected easing of Norwegian COVID-19 restrictions, which have generally benefited the company. It was also driven by efficiency measures such as use of electric vehicles and solar panels; this partly offset higher energy prices, which increased operational costs by NOK 380m over the year.
The company's gross margin fell slightly to 25.7% as of end-2021 from 26% a year earlier, primarily driven by strong shelf-price reductions at soft discounter KIWI, while its NCR-adjusted EBITDA margin fell to 9.4% from 10%.
Norwegian food prices rise only moderately
Food prices in Norway rose by a moderate at 0.8% in the year to February 2022, unlike in other Scandinavian countries where they rose sharply over the same period. Aside from the sharp price reductions at KIWI, NorgesGruppen has not increased prices substantially at its other stores.
Rising food prices due to higher input costs and the war in Ukraine could reduce margins, but in our opinion the company's domestic focus mitigates this risk.
Figure 1. NorgesGruppen key credit metrics, 2017–2021
| NOKm | 2017 | 2018 | 2019 | 2020 | 2021 |
|---|---|---|---|---|---|
| Total revenue | 85,632 | 87,813 | 90,326 | 101,385 | 102,885 |
| NCR-adj. EBITDA | 7,210 | 6,861 | 7,774 | 10,172 | 9,659 |
| NCR-adj. net debt | 21,880 | 22,404 | 25,158 | 22,720 | 20,766 |
| Total assets | 37,678 | 39,171 | 59,961 | 62,950 | 64,535 |
| NCR-adj. net debt/EBITDA (x) | 3.0 | 3.3 | 3.2 | 2.2 | 2.1 |
| NCR-adj. EBITDA/net interest (x) | 6.7 | 6.3 | 6.8 | 8.8 | 8.8 |
| NCR-adjusted FFO/net debt (%) | 24.9 | 22.9 | 23.7 | 34.9 | 36.5 |
| NCR-adjusted FOCF/net debt (%) | 14.7 | 8.0 | 5.8 | 24.2 | 26.9 |
This commentary does not constitute a rating action.
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com