Agusto affirms A-rating with stable outlook to Sundry Foods

A rating agency, Agusto & Co has affirmed A-rating to one of the operators in Nigeria’s food services sector, Sundry Foods Limited (SFL) with a stable outlook.

This comes about three weeks after an international rating agency; Global Credit Ratings (GCR) accorded SFL the national scale long-term and short-term issuer ratings of A-(NG) and A2 (NG) with revised outlook to positive.

“Agusto & Co upgrades the rating assigned to Sundry Foods Limited (‘Sundry Foods’, ‘SFL’ or ‘the Company’) to ‘A-,’” Nduka Mokwunye, head Marketing, SFL, announced in a statement quoting the credit agency’s latest report.

In the report, Agusto & Co noted that the rating upgrade reflects SFL good profitability, moderate leverage, adequate working capital as well as good and sustainable cash flow position which it said is supported by the company’s favourable trade terms with its customers and creditors.

The rating agency said that other factors that influenced the latest SFL rating include aggressive expansion drive as well as the company’s good market position in the capacity of a leading player in the Quick Service Restaurant (QSR) industry with a stable and experienced management team.

Similarly, SFL cumulative Operating Cash Flow over the recent three-year period (2019 – 2021) was enough to meet dividends and interest payments; therefore, in the rating agency’s opinion the company’s cash flow position is good and sustainable given its business model.

To buttress its point, the rating agency said, “SFL recorded a 75percent increase in revenue performance in the first quarter of 2022 from a similar period in the previous year, adding that SFL recorded an improved operating profit margin and profit before tax margins to 13.5percent and 11.2percent, respectively (FYE 2020: 9.7percent, 7.5percent).

“As at the reporting date, SFL posted a pre-tax pre-interest return on assets (ROA) and pre-tax return on equity (ROE) of 23 percent and 51percent, respectively.”

According to the rating agency, “This is reflective of the company’s continued expansion evidenced by the opening of eight additional outlets as at the end of the first quarter of 2022. Thus, SLF posted an annualised ROA and ROE of 33percent and 66percent which are good in our opinion.”

Other key rating drivers the agency highlighted in the report include short-term and long-term financing surpluses of N1.2 billion and N935 million respectively as of December 31, 2021, which SFL recorded resulted in an overall working capital surplus of N2.1 billion which the agency considered adequate.

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On SFL’s stable outlook, Agusto & Co said that it reflects its expectations that financial performance and credit metrics will continue to support SFL A- rating despite economic and industry headwinds.

Speaking on the new feat, Ebele Enunwa, SFL managing director, remarked that the latest rating by a renowned rating agency has reinforced the fact that “we are a credit-worthy company in the country with a very good investment potential for many local and international investors and financiers.”

He reiterated the company’s commitment to deliver exceptional performance in all its brands offering with intense focus on excellence and best practices.

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