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Leading Rating Agency, Agusto & Co, has affirmed A- rating to food services giant in Nigeria, Sundry Foods Limited (SFL) with stable outlook.
This comes nearly three weeks after an international rating agency, Global Credit Ratings (GCR) accorded SFL the national scale long term and short term issuer ratings of A-(NG) and A2 (NG) with revised outlook to positive.
‘’Agusto & Co upgrades the rating assigned to Sundry Foods Limited (“Sundry Foods”, “SFL” or “the Company”) to “A-,” Mr. Nduka Mokwunye, Head Marketing, SFL, announced in a statement quoting the credit agency’s latest report.
In the report, Agusto & Co noted that the rating upgrade reflects SFL good profitability, moderate leverage, adequate working capital as well as good and sustainable cash flow position which, it said, is supported by the company’s favourable trade terms with its customers and creditors.
The rating agency said that other factors that influenced the latest SFL rating include; aggressive expansion drive as well as the company’s good market position in the capacity of a leading player in the Quick Service Restaurant (QSR) industry with a stable and experienced management team.
Similarly, SFL cumulative operating cash flow over the recent three-year period (2019 – 2021) was enough to meet dividends and interest payments; therefore, in the rating agency’s opinion, the company’s cash flow position is good and sustainable given its business model.
To buttress its point, the rating agency said, SFL recorded a 75 per cent increase in revenue performance in the first quarter of 2022 from a similar period in the previous year, adding that SFL recorded an improved operating profit margin and profit before tax margins to 13.5 per cent and 11.2 per cent respectively (FYE 2020: 9.7 per cent, 7.5 per cent).
“As at the reporting date, SFL posted a pre-tax pre-interest return on assets (ROA) and pre-tax return on equity (ROE) of 23 per cent and 51 per cent respectively. “This is reflective of the company’s continued expansion evidenced by the opening of eight additional outlets as at the end of the first quarter of 2022. Thus, SLF posted an annualized ROA and ROE of 33 per cent and 66 per cent which are good in our opinion,’’the rating agency said.
Other key rating drivers the agency highlighted in the report include a short-term and long-term financing surpluses of N1.2 billion and N935 million respectively as at 31 December 2021, which SFL recorded that resulted in an overall working capital surplus of N2.1 billion which agency consider adequate.
On SFL’s stable outlook, Agusto & Co said that it reflects its expectations that financial performance and credit metrics will continue to support SFL A- rating despite economic and industry headwinds.
