Moody’s has changed Boparan Holdings Limited’s outlook from stable to negative, following weaker than expected operating performance in the second quarter of 2017, which the company had attributed to “several exceptional items”, including the closure of scandal-hit Site D in West Bromwich.
Announcing the decision, the credit rating company noted that the new outlook for Boparan (which owns 2 Sisters Food Group) reflected its view that “challenging market conditions for food manufacturers in the UK and inflationary headwinds could pressure Boparan’s profitability in the next 12 to 18 months”.
It added that due to weak credit metrics, there is “limited headroom under the current rating to tolerate further deterioration in operating performance”, but highlighted that views “positively the mitigating measures undertaken to date by the company”.
It cautioned, however, that those measures are “subject to some degree of execution risks”, as the impact of price increases on volumes remains “uncertain and will also depend on retailers’ pricing and promotional strategy”.
“That being said,” Moody’s added, “in the Protein segment, this is mitigated by the fact that poultry remain less expensive than other sources of protein, such as red meat or fish.”
Additional downside risks on profitability include, according to Moody’s, “sporadic Avian flu outbreaks in the UK or continental Europe, which could affect export of poultry-by products profitability decline in red meat due to lower volume and/or rising input costs, planned increases in the UK national living wage, and fierce competition across the different segments which could result in contract loss and/or lower market share”.
This story was originally published on a previous version of the Meat Management website and so there may be some missing images and formatting issues.
