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GCR affirms A-(NG), A2 (NG) rating to Sundry Foods

Street food business booms as unemployment bites

Leading Foods Services Company in Nigeria, Sundry Foods Limited (SFL) has been accorded the national scale long-term and short-term Issuer ratings of A-(NG) and A2 (NG), respectively by international rating agency, Global Credit Ratings (GCR) with the Outlook affirmed as Positive.

Nduka Mokwunye, SFL’s head, Marketing, said in a statement that the affirmation of the company’s national credit ratings by GCR was contained in the latest report of the credit rating agency.

“GCR Ratings (GCR) has affirmed the national scale long-term andshort-term Issuer ratings of A-(NG) and A2(NG), respectively assigned to Sundry Foods Limited (‘Sundry Foods’ or ‘the Company’). Concurrently, GCR has affirmed the national scale long-term Issue rating of A-(NG) accorded to Sundry Foods Funding SPV Plc’s N2.5bn Series 1 Bonds. The Outlook on the rating has been revised to Positive,’’ the statement said, quoting GCR report.

In explaining the rationale behind its decision, GCR said that the company maintained competitive strengths, good earnings and sound gearing metrics in the year under review, even as it reiterated that the positive outlook reflects its opinion that SFL will sustain the strong earnings growth trajectory and maintain moderate gearing metrics amid its business expansion activities.

“The competitive position of Sundry Foods is anchored on its growing business and increasing market penetration. The company has developed a good brand presence in the market, with six brands entrenched in the quick service restaurant, bakery, and catering services segments.” GCR said.

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It further noted that Sundry Foods increased its retail outlet count to 149 stores as of December 2022, from 145 stores in June 2022, adding that SFL’s competitiveness is also bolstered by its relatively stronger profitability compared with industry peers.

The international rating agency admitted that the earnings performance counted as a positive rating factor, supported by the sustained upward revenue progression and sound earnings margins.

According to GCR, revenues for financial year 2022, which ended December 31, 2022, grew by 56.6 percent, noting that the strong top line growth was largely supported by additional revenue from the 17 new outlets that were rolled out during financial 2022 and coupled with upward price review across all stores.

GCR noted that as the company sustains its expansion drive, it anticipates revenue growth of 32 percent in 2023 and 35 percent in 2024.

On the other hand, GCR also acknowledged SFL’s EBITDA margin decline to 17.9 percent in 2022 from 18.6percent in 2021, due to sustained inflationary pressures and high energy costs, but noted it remains sound and above the peer average.

“We expect the EBITDA margin to be sustained within the range of 18-19 percent in 2023 and 2024 on the back of sustained economies of scale and effective cost management measures,” it stated.

GCR also said: “The Positive Outlook reflects our expectation that the company will sustain the strong growth in earnings and maintain robust cash flows, which should keep leverage metrics at a moderate level over the next 12-18 months, despite the planned increase in debt.”

Commenting on the achievement, SFL’s Managing Director, Ebele Enunwa, said: “This affirmation and improved outlook recognises our consistent growth performance and strong balance sheet management. Over the years, we have continued to demonstrate leadership within our sector, with rapid expansion strategy despite the unstable operating environment.

“This affirmation which follows the thorough independent assessment by a reputable international credit agency is a testament that we are progressively growing stronger. It also highlights the fact that we are one of the highest credit-worthy organisations in the country and a very good investment potential for many local and international investors and financiers.”