Fitch revises Metro AG’S out­look to neg­a­tive

The Pak Banker - - Front Page -


Global rat­ing agency Fitch has re­vised the Out­look on Metro AG’s (Metro) Longterm Is­suer De­fault Rat­ing (IDR) to Neg­a­tive from Sta­ble and af­firmed the IDR and se­nior un­se­cured rat­ing at ‘BBB’.

Global rat­ing agency Fitch has also af­firmed the un­se­cured rat­ing of the notes is­sued by Metro Fi­nance BV at ‘BBB’. These notes are guar­an­teed by Metro AG.

The Neg­a­tive Out­look re­flects the in­creased chal­lenges faced by Metro in re­duc­ing lever­age due to the weak con­sumer en­vi­ron­ment pri­mar­ily in south­ern Euro­pean coun­tries and the group’s ex­po­sure to non-food re­tail ac­tivi- ties.

Global rat­ing agency Fitch es­ti­mates that Metro’s ex­po­sure to Spain, Italy, Greece and Por­tu­gal rep­re­sents about 12% of group’s sales and 25% in Eastern Euro­pean coun­tries.

Fitch ex­pects that weak con­sumer de­mand will continue to weigh neg­a­tively on the group’s oper­at­ing per­for­mance, as ev­i­denced by the re­vised guid­ance for group EBIT be­fore spe­cial items in FY12 at circa EUR2bn. As a re­sult, Fitch ex­pects Metro’s group lease-ad­justed net debt/EBIT­DAR ra­tio to in­crease to about 3.5x in FY12 from 3.2x in FY11 which is high for the cur­rent ‘BBB’ rat­ing level.

The ‘BBB’ rat­ing con­tin­ues to re­flect Metro’s size and lead­ing mar­ket share po­si­tions in many mar­kets as well as its broad ge­o­graphic di­ver­si­fi­ca­tion. How­ever, the pro­tracted weak con­sumer sen­ti­ment, in­tense price com­pe­ti­tion from food and non-food re­tail­ers and on­line re­tail­ers will continue to put pres­sure on the group’s per­for­mance and credit pro­file. Key chal­lenges re­main Metro’s ca­pac­ity to im­prove like- for- like sales growth, im­prove prof­itabil­ity in its con­sumer elec­tron­ics division Me­dia Markt and Saturn and food re­tail division Real. In ad­di­tion, Metro’s con­sumer elec­tron­ics busi­ness still needs to roll out its in­ter­net plat­form and de­velop a suc­cess­ful multi- chan­nel busi­ness.

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