April 29, 2024 10:31 GMT
La Doria (NR, B, B Pos.) Private co
CONSUMER STAPLES
It's been rated by Fitch & S&P since mandating a €500m 5.5NC1 Sr secured floater on Friday. Net supply here is only €150m (term loans being paid down) - but will still move gross leverage from 2.7x to 3.8x. Tomato supplier concentration in Italy (hence exposure to weather/prices there) seems key risk for raters but rating headroom there on BS.
Uncertainty on mgmt plans to expand could be credit negative on large M&A. Recent retailers we saw include Evoca (B3, B-) issuing earlier this month at 3m+525 on its 5NC1 & Jeweller Goldstory (B2, B+) on a 6NC1 in Feb at 3m+400 - both trading tighter on spreads since.
- La Doria is mainly a private label manufacturer (96%) for canned tomatoes (24% of revenue), sauces (15.5%), vegetables/beans (28.5%) & juices (~7%). It says its market leading (no. 1-2) in these segments for private labels in UK (58% of sales) & Italy (15%).
- It uses mix of open book contracts where it can price based on cost of raw materials - these contracts are longer term (3-5yrs) but are repriced annually & mainly with UK customers. Closed book are kept short-term and re-priced on annual basis with prices agreed before the season based on projections. Unclear what exact split is but UK is 58% of sales & top 3 clients are ~50% of sales. Seems to be some vol on Opex/EBITDA margins, raw material costs (where the vol is) is 45% of total COGS.
- Revenue has grown consistently now at €1.2b - price increase has done the legwork with volume growth positive but volatile. EBITDA margins fluctuate from 8-11% and was at high end to end FY23 leaving €148m (at 12%). Operating cash flow conversion is 80-90% on EBITDA net of recurring capex - in FY23 that left €117m.
- On cash; Some vol in working capital that but FCF generally sits at €60-70m mark. - S&P is looking for recurring FOCF of at least €25-30m/yr. Seems near term capex guidance is ~€40m of which 50% will be covered by government subsidies it says. Capex outside extra-ordinary 2019 has generally run at ~2% of sales/€15-20m/yr. S&P has assumed €25-30m this year & €20m in FY25.
- On BS: had €350m in term loans which it will pay down, cash on hand is €90m leaving net debt post issuance of €500m note at €410m (€421m including leases & other). On FY23 EBITDA that's net leverage of 3.2x or gross of 3.8x., up from 1.9/2.7x pre issuance. Its also issuing a €85m super senior revolver - S&P expects it to remain undrawn for now.
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