Marfrig Global Foods was upgraded to Ba2 from Ba3 by Moody’s with a positive outlook. Moody’s notes that Marfrig has shown strong operational performance and adequate liquidity, lower financial expenses driven by the liability management strategies, and its ability to weather the volatility of the beef business. The company is expected to reduce 2022-2024 debt maturities, which represent about 38% of total debt as of Q1 2022. The company relies on the North America segment, which contributes about 75% of the company’s revenues, but a slack in US demand could lead to weaker margins and pressure credit metrics. Marfrig is set to capture the supportive fundamentals of the US market and the strength in exports from South America. Moody’s notes that higher participation of processed foods in its mix and continuous focus on productivity and cost-cutting will also support margins. For diversification, Marfrig acquired 33.25% stake in BRF S.A. to get into the poultry and pork segments. Moody’s says that the ability to implement a robust traceability policy can mitigate production risk exposure, a social factor in their ESG risk assessment. As per the rating agency, to maintain an upward rating, Marfrig requires to keep total adjusted debt/EBITDA sustained at or below 2.5x and EBITA/interest expense, sustained at 5.5x and above.
Marfrig’s dollar bonds were trading higher, with its 3.95% 2031 up over 0.92 points to 82.21 yielding 6.51%.