Reuters logo
RPT-Fitch: Metro's results flag business risks for food retailers
March 21, 2013 / 12:45 PM / 5 years ago

RPT-Fitch: Metro's results flag business risks for food retailers

(Repeat for Additional Subscribers)

March 21 (Reuters) - (The following statement was released by the rating agency) Metro's 2012 results highlight the challenges that the European food retail industry is facing, Fitch Ratings says. Progress in fixing the core business rather than just deleveraging through asset divestments will be the main rating driver for European food retailers in 2013. The capacity of these groups to improve their operating margins and reduce debt by internal free cash flow will be key to stabilising the industry outlook, which remains Negative. Ahold, Metro and Carrefour's business disposals have reached an aggregate of about EUR6.4bn since Q412. European retailers' decision to focus on cash preservation and business rationalisation is positive. After a decade of international expansion they are attempting to simplify their businesses to cope with a sluggish consumer market in Europe where customers are price sensitive and savvy in their consumption. In addition to asset disposals, some large retailers have also changed their dividend policies. Metro has proposed a reduction of its dividends for the financial year 2012 of EUR1.00 per ordinary share (2011: EUR1.35). Carrefour established in the last fiscal year a new pay-out policy of about 45% of net earnings adjusted for exceptional items and is proposing a dividend this year payable in cash or in shares. We expect that proceeds from cash received will be used to partially reduce debt or improve business operations. Investment is needed to refurbish stores and meet customer demand for online or other services, such as click and collect or drive-thru supermarkets, where customers who order online can pick up the groceries when it suits them and have them loaded into their cars. The Negative Outlook on Metro's 'BBB' rating reflects operating pressures in its core Cash and Carry and Media-Saturn divisions in Europe due to the subdued consumer environment and competition on its non-food segment offer from retail specialists and online operators. Metro's cash preservation measures are positive for bondholders. However, in order to stabilise the rating Outlook we need to see the group's capacity to improve or at least sustain its trading performance in 2013, rather than reducing its adjusted FFO net leverage (currently at about 4x) from dividends or divestments proceeds. Link to Fitch Ratings' Report: 2013 Outlook: European Food Retail here

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below