EU CONSUMER STAPLES: Sudzucker | FY25 Final

(SZUGR; Baa2 Neg/BBB Neg) 

Please note the floating hybrid has an interest payment covenant contingent on operating ex. WC cash flows being > 5% of revenues. It has snuck in at 5.3% this year. Seniors are firmly uninteresting on retail denominations. As we learnt in primary, caution on fighting that - it has rallied 45bps vs. Mondelez in the four months since. We still expect downgrades at both raters - mainly on the FY26 guidance.

FY25 (to Feb) final numbers in line with prelim: revenues -6% y/y, EBITDA -45%, EBIT -63%
FY26 guidance reaffirmed:

• Revenue €8.7-9.2b (-8% y/y at midpoint)
• EBITDA €525m-675m (-17% at midpoint)
• EBIT €150-300m (-36% at midpoint)
  • this include expected €100-200m loss in the sugar segment
  • it expects support for sugar prices for next year marketing year (beginning October)
• Below EBIT circa €100m in interest this year. Re. next year refi on the Nov 25s cost it +326bps/+€16m/yr but the €700m hybrid is a floater (3m -70bps YTD).
   
• It has done +€433m in FCF but tis is from a favourable WC swing (+€426m) which is being helped by lower sugar inventories (down €700m on both volume and price falls).
• It has already refinanced the November maturity
• We see it net levered 3.0x (including 50% hybrid treatment) with a move up to 3.5x on next year's guidance (FFO to debt from 23% to 19%).
• Rating downgrades should be expected on those metrics.