Our 'BBB-' issuer and issue ratings on Nortura SA (Nortura) are unchanged following the publication of its results for the final four months of 2021.
Revenues improve, but increasing costs keep EBITDA in check
Nortura reported revenues for full-year 2021 of NOK 26.6b, an increase of 7.6% over the previous year and 4.3% above our previous estimate. The increase was driven by increased sales volumes throughout the year. High energy costs in the last four months of 2021 negatively impacted costs by NOK 107m, while a cyber attack at end-December resulted in extraordinary IT costs of NOK 36m. The strong revenue growth allowed the company to make increased payments to farmer owners of NOK 70m for the full year. Nortura's NCR-adjusted EBITDA margin was 3.0% for the full year, compared with our expectation of 3.5%. The company reported increasing activity in the hotel, restaurant and catering division, where sales rose 14% year on year in the last four quarters. It expects this trend to continue, leading to a stronger market position for some of its brands.
We expect the Russian invasion of Ukraine to have a negative effect on energy costs and some input costs, driving up overall cost levels for both Nortura and its farmer members. We note Nortura's ability to pass such cost increases on to end-customers, but expect some margin pressure to persist.
Metrics remain strong despite disruptions to cash flows
Nortura's working capital increased significantly during the last four months of the year, partly due to increased inventories but mostly due to the December cyber attack, which resulted in increased trade receivables which are normally financed by factoring with corresponding cash inflows. Because we typically adjust for factoring in our calculation of net debt, the effect on NCR-adjusted net debt was negligible. However, the mix of debt and cash holdings resulted in increased interest costs, which, coupled with relatively low EBITDA, negatively affected NCR-adjusted EBITDA/net interest, which stood at 7.6x for the full year compared with our expectation of 8.3x. NCR-adjusted net debt/EBITDA for the full year was 3.1x, slightly below our expectation of 3.2x. Nortura received adequate support from its banks during the cyber attack and the resulting period of reduced payments, which we see as positive in terms of overall liquidity risk.
Nortura plans to publish a sustainability report in April this year, based on Global Reporting Initiative standards, with an increased focus on environmental, social and governance issues which we see as highly relevant for the livestock industry.
Figure 1. Nortura key credit metrics, 2017–2021
| NOKm | 2017 | 2018 | 2019 | 2020 | 2021 |
|---|---|---|---|---|---|
| Total revenue | 23,545 | 23,449 | 23,728 | 24,723 | 26,614 |
| NCR-adj. EBITDA | 709 | 679 | 818 | 883 | 797 |
| NCR-adj. net debt | 3,937 | 3,345 | 3,057 | 2,755 | 2,509 |
| Total assets | 9,595 | 9,476 | 9,316 | 9,221 | 9,272 |
| NCR-adj. net debt/EBITDA (x) | 5.6 | 4.9 | 3.7 | 3.1 | 3.1 |
| NCR-adj. EBITDA/net interest (x) | 6.2 | 5.9 | 7.6 | 8.3 | 7.6 |
| NCR-adjusted FFO/net debt (%) | 13.3 | 16.4 | 20.5 | 25.5 | 44.0 |
| NCR-adjusted FOCF/net debt (%) | -7.7 | 12.4 | 11.0 | 11.4 | 5.8 |
This commentary does not constitute a rating action.
Contacts:
Mille Fjeldstad, analyst, +4799038916, mille.fjeldstad@nordiccreditrating.com
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com