Food & Drinks

Cerelia growth strategy seen as promising | 2020-07-03

MADRID — Cerelia Group, a producer of frozen and refrigerated dough based in Paris, is poised for growth as it invests in new products and geographies, according to Moody’s Investors Service.

On July 2, Moody’s assigned Cerelia Participation Holding SAS a first-time B3 corporate family rating. Cerelia, which last month announced plans to build a new manufacturing facility in Ohio, was acquired recently by investment funds managed by Ardian, a private-equity firm based in France.

“The B3 rating balances Cerelia’s strong business profile as Europe’s leading manufacturer of chilled dough and pancakes having dominant market shares in its niche product categories, geographically diversified sales, established relationships with key private label customers and low operating costs against its elevated leverage, anticipated upswing in capital spending and execution risks related to its ambitious growth plan, particularly the turnaround of its North American business,” said Igor Kartavov, a Moody’s lead analyst for Cerelia.

Moody’s said Cerelia’s outlook is positive.

“The company is strongly positioned at the current rating level, but the pace of its future growth and deleveraging remains the key uncertainty,” Mr. Kartavov said.

Pluses identified by Moody’s for Cerelia include the company’s leading market share in Europe in its core pie dough, pizza dough and pancake categories, geographic diversification, a strong base of private label business complemented by branded products, low production costs and adequate liquidity.

Constraining the Cerelia credit rating were high leverage (6.5 times EBITDA as of June 2020); the company’s modest scale with €468 ($526 million) in annual sales and EBITDA of €63 million ($71 million) in the 12 months ended June 2019. Moody’s cautioned that Cerelia’s focus is “relatively niche market segments” and faces execution risk in connection with a volume-driven growth strategy.

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In North America, Cerelia has experienced “prolonged deterioration” because of the company’s position in the highly competitive baked cookie and refrigerated dough markets.

Helping secure the company’s outlook is Cerelia’s position as the largest maker of private label dough products in Europe. Moody’s said Cerelia’s prospects are favorable.

“The positive outlook reflects Moody’s expectation that Cerelia will  organically increase its scale, primarily owing to sales volumes growth  across key markets and new geographies, and improve profit margins  because of new facility launches, gradual changes in product mix and  productivity initiatives, while largely passing through costs of raw  materials,” the ratings agency said. “The positive outlook also incorporates the rating agency’s expectation that Cerelia will further reduce its financial leverage in the next 12 to 18 months, with a Moody’s-adjusted gross debt-to-EBITDA ratio trending to 6.0x in 2021.”

Concurrent with its corporate rating of B3, Moody’s issued a B3 rating to a €420 million ($472 million) senior secured term loan due in 2027 and a €100 million ($112 million) senior secured revolving credit facility.

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