West Africa Rating Agency (WARA) has affirmed the long- and short-term ratings of the SIFCA Group, as well as its bond rating. On WARA’s regional scale, the long-term credit and bond rating of the SIFCA Group remains "BBB+", an investment grade credit rating, and the short-term credit rating stays "w-4". However, the outlook attached to these ratings is revised from stable to positive.
Simultaneously, WARA has also affirmed SIFCA’s ratings on its international scale, while revising the outlook from stable to positive. Therefore, the foreign-currency ratings and outlook of SIFCA become: iB+/Positive/iw-5.
The main reason why WARA has made this decision to revise the outlook to positive stems from the considerable efforts the Group have made to lower its breakeven point, as a result of twin actions: i) strict control over costs in all three lines of business, and ii) larger production capacities, in order to capture economies of scale without compromising quality. WARA shares the Group’s option according to which this strategy is the only viable way to strengthen SIFCA’s resilience against the volatility of palm oil and rubber prices. Nevertheless, SIFCA’s ratings remain structurally dependent on price volatility. Indeed, the evolution of the world prices for these commodities directly affects SIFCA’s revenues, in an exogenous way. However, SIFCA’s competitive advantages in its market, its impeccable management of the value chain for natural rubber, palm oil and sugar, as well as its healthy financial position, despite market volatility, are three key rating factors. More volumes make heavy investments necessary: notwithstanding a stronger capacity to generate operating cash flows thanks to sustained commodities prices since 2016 and robust cost controls, the Group will likely raise more debt, which in turn will reduce its financial flexibility.
The counterparty credit rating of SIFCA benefits from no external support factor. However, WARA’s opinion with regards to SIFCA’s creditworthiness takes into account the advantages that the Group extracts from the close relationships it has built with its strategic shareholders, i.e. Wilmar in the palm oil sector, and to a certain extent, with Michelin in the rubber sector and Terra in the sugar sector.
Established in 1964 in Abidjan, SIFCA holds a key position within the West-African agro-industrial sector and economic ecosystem. SIFCA is the first private-sector employer in Cote d’Ivoire, with more than 30,000 employees.
SIFCA’s rating of ‘BBB+’ is 2 notches above the minimum credit rating accepted by the CREPMF to issue debt without a guarantee.
