BEL {UNBL FP Equity} €300-500m 5y Sr Unsec. (unrated)

Leverage in low 2's & no noticeable issues on liquidity are positives but unrated issuance & poor margins the negatives - latter should see it price wide. Comp Danone (BNFP; Baa1,BBB+) 5y goes through at MS+42. It runs higher leverage (against adj. operating income), but has much better operating margins (at 12-15%), stronger cash conversion & larger scale (€27b in sales). Main uncertainty we see for investors is dividends (including those to holdco/Unibel). We'll refrain from FV (we don't have a ballpark on NR discount needed for investors) but floor on pricing (against rated names) is MS+60 which is where Kerry Group (KYGID; Baa1/BBB+) secondary trades.

• Business: Bel is owned by Unibel {UNBL FP Equity} which is 90% owned by founding Fievet/Bel Families. Revenue is 44% in Europe, 39% in Americas & 17% in EMEA. Cheese and dairy products make up most of the business (75% of sales), fruit products & plant based the other 25%. Deck doesn't indicate a strong reliance on any one brand & similar story on clients where it says no one client makes up more than 5.5% of sales.
• Sales: It had €3.65b of rev's in FY23 (+5.8% organic), COGS was €2.7b with €1.3b of that from raw materials including 47% from Milk (highlights price exposure). That left gross profit at €973m/26.7% margin, recurring operating income at €251m/6.9% and net profit at €69m. Its ran operating margin north of 7% pre-covid - it says Covid impacted profitability but 2023 (at 6.9%) was recovery out of that.
• Cash flow: FCF was €55m in FY23m (down from €214m last yr) - it says adjusted for calendar effects & one-off tax FY23 would be €111m and FY22 €130m. Adding to that its saying capex in FY23 of €168m was elevated due to "USA squeeze" - no guidance but points to 2015-23 avg. of €135m. It still decided to pay €100m in dividends last year, part of that its attributing to no dividend in '21 and to cover Unibel's dividend (holdco). Its generally averaged under €50m/yr in dividends but changes in structure (with Unibel) may change this.
• BS: It runs net debt of €839m (gross €1.4b) & against operating income it leaves leverage at 2.1* - soft target seems to be 2.3* with a banking covenant at 3.75*. It says the €484m in maturities this year have already been refinanced (points to cash balance of €633m) and has access to €550m undrawn revolver. Outside of this year maturities avg, up to ~€200m/yr.