13th Aug 2020 18:55
(Alliance News) - Moody's Investor Service on Thursday affirmed the A3 long term issuer rating and the senior unsecured rating of Coca-Cola European Partners PLC.
The credit ratings agency also affirmed the Coca-Cola bottler's Prime 2 (P-2) short-term rating.
The outlook is stable, Moody's noted.
"The affirmation takes into account CCEP's strong business profile and the resilient fundamentals of the beverage industry in times of economic stress, which are the key mitigating factors to the expected decline in profits in 2020," Ernesto Bisagno, Moody's vice president & senior credit officer and lead analyst for CCEP, said.
Despite the expected fall in profit in 2020, Moody's said the A3 rating is supported by the firm's "strong brand portfolio" and market shares as the largest independent bottler in the Coke system.
Bisagno continued: "The rating affirmation also reflects Moody's expectation that the company will maintain a financial policy that balances creditor protection and shareholder remuneration in the current uncertain environment, and that market conditions and CCEP's performance will recover in 2021."
Moody's also said the A3 rating benefits from a one-notch rating uplift, reflecting the "implied support" from Coca-Cola Co - which Moody's currently rates at A1 stable.
The rating is held back, Moody's noted, by its exposure to the "low growth environment" across Europe, and its track record of "significant" shareholder distributions, but Moody's noted the company has recently suspended its share buyback until visibility recovers.
"Assuming that the efforts to contain the spread of coronavirus are successful and there are no further widespread lockdowns, Moody's expects additional sequential improvement in trading performance in the second half. Despite the sequential improvement in the second half, Moody's expects CCEP to report a 25% to 30% decline in 2020 Moody's adjusted earnings before interest, taxes, depreciation, and amortization," the credit rater said.
Moody's added: "Return to profit growth in 2021 will be driven by a significant improvement in volumes from what will be a low base in 2020 and by CCEP's continued focus on higher-margin premium products."
Shares in Coca-Cola European Partners closed up 0.3% at EUR36.15 each.
By Paul McGowan; [email protected]
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