Nordic Credit Rating has revised the outlook on its 'BB+' long-term issuer rating on Norway-based food producer Nortura SA to positive from stable. The long-term rating and 'N4' short-term issuer rating have been affirmed, as has the 'BB+' senior unsecured debt rating and the 'BB-' subordinated debt rating.
Rating rationale
The long-term issuer rating reflects Nortura's weak financial metrics and continuous pressure on its margins. However, we have raised our assessment of financial risk, reflecting lower leverage expected in 2025 and early signs of a margin recovery. Nortura's corporate structure reduces opportunities to achieve economies of scale due to a statutory obligation to take produce from farmers throughout Norway, which in turn impedes inventory management. The rating is constrained by increasing competition from producers, distributors, and retailers, as well as megatrends, such as public concern about emissions, animal welfare and health.
Nortura has a solid market position through its brands Prior and Gilde, with consumer demand met through a variety of distribution channels. The company's strong relationships with grocery retailers support its operations. The rating is further supported by Nortura's statutory role as market regulator, which creates barriers to entry and ensures the company's systemic importance in the Norwegian food market.
Positive outlook
The outlook is positive, reflecting an improved supply-demand balance, better inventory management and stronger margins. The company remains exposed to market fluctuations but is taking steps to enhance its resilience. We expect the company to further enhance its operating margins and credit metrics through ongoing efficiency investments. We believe market conditions will remain favourable for Nortura and assume the company will retain its regulatory role and strong market position.
We could raise the rating if net debt/EBITDA remains sustainably below 3.5x, EBITDA/net interest stays above 4.5x, and operating efficiency continues to improve, with EBITDA margins stabilising at around 4%. In addition, we would look for sustained improvements in supply-demand predictability over an extended period.
We could revise the outlook to stable if EBITDA margins fail to stabilise at around 4%, leverage increases beyond our expectations, or supply-demand volatility persists.
| Rating list | To | From |
|---|---|---|
| Long-term issuer credit rating: | BB+ | BB+ |
| Outlook: | Positive | Stable |
| Short-term issuer credit rating: | N4 | N4 |
| Senior unsecured issue rating: | BB+ | BB+ |
| Subordinated issue rating: | BB- | BB- |
Contacts:
Geir Kristiansen, analyst, +4790784593, geir.kristiansen@nordiccreditrating.com
Ylva Forsberg, analyst, +46768806742, ylva.forsberg@nordiccreditrating.com
Elisabeth Adebäck, analyst, +46700442775, elisabeth.adeback@nordiccreditrating.com
The methodology documents used for this rating are NCR's Corporate Rating Methodology published on 8 May 2023, NCR's Rating Principles published on 14 Feb. 2024 and NCR's Group and Government Support Rating Methodology published on 14 Feb. 2024. For the full regulatory disclaimer please see the rating report.