Fitch Affirms 'BBB+' Ratings of Coca-Cola Femsa -KOF-.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed the 'BBB+' foreign and local currency ratings of Coca-Cola Femsa Coca-Cola FEMSA is the anchor bottler of Coca-Cola and its related soft drink products in much of Latin America. The company is an important part of the Coca-Cola System. Specifically, Coca-Cola FEMSA distributes about 10% of the worldwide production of Coca-Cola products. S.A. de C.V. (KOF KOF King of Fighters (game) KOF Konjunkturforschungsstelle (Zurich, Switzerland) KOF Knights of Freedom (online gaming clan) KOF Knights of Fire ). Fitch has also affirmed KOF's 'AAA(mex)' national scale rating for its peso-denominated debt. The Rating Outlook is Stable. The affirmation of KOF's international and national scale ratings takes into consideration debt refinancing and repayment consistent with Fitch's expectations. KOF's investment-grade credit ratings continue to reflect concern about increased competition by small bottlers in the company's principal market, Mexico. These small bottlers have put significant pressure on prices for soft drinks in this market, which accounted for about 75% of KOF's operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. during the first nine months of 2004. KOF's 'BBB+' foreign currency rating exceeds Fitch's 'BBB' Mexico country ceiling rating due to the explicit and implicit financial support KOF receives from The Coca-Cola Company (KO). This financial support has also been factored into Fitch's 'A+' credit rating of KO. Other factors that support rating the company over the country ceiling include KO's long history of financially supporting its key bottlers, its 39.6% ownership stake in KOF and, to a lesser extent, the geographic diversification of KOF's cash flows. KOF's strategic importance to KO is due to its status as the second-largest bottler of Coca-Cola products in the world, accounting for about 10% of the worldwide sales of Coke products. In addition, the company is KO's largest bottler in Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. , representing nearly 40% of all sales in the region. As a result of strong free cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses , the receipt of an MXP MXP In currencies, this is the abbreviation for the Mexican Peso. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 1.18 billion cash reimbursement from the Mexican government during August 2004 and the weak Mexican peso, the company has been able to reduce dramatically the debt associated with the purchase of Panamco in May 2003. As of Sept. 30, 2004, the company had US$2.220 billion of total debt and US$1.925 billion of net debt. These figures represent declines of US$608 million and US$573 million, respectively, from May 2003. The company has lowered debt and improved its debt profile significantly by successfully refinancing its US$839 million one-year bridge loan and US$748 million of debt due from 2005 to 2008, thus extending maturities. The resulting maturity profile is a very manageable one, with debt amortizations of no more than US$400 million in any particular year, except for 2010, when US$421 million is due. In 2004, KOF should generate approximately US$850 million of EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become . This should translate into a total debt-to-EBITDA ratio of about 2.5 times (x) and a net debt-to-EBITDA ratio of approximately 2.2x. These ratios remain consistent with the ratings, given the company's business profile and the implicit and explicit support it receives from KO. KOF bottles, sells and distributes Coca-Cola products in central and southern Mexico, Brazil, Argentina, Colombia, Venezuela and a number of countries in Central America. With sales of more than 1.83 billion unit cases, the company is the largest KO bottler in Mexico and Latin America, and second largest in the world in terms of sales Terms of sale Conditions under which a firm proposes to sell its goods or services for cash or credit. volume. During the first nine months of 2004, Mexico represented 60% of total sales and 70% of the total EBITDA generated by the company. |
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