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Retail

Moody's Announces Ahold Delhaize Ratings Upgrade

Ratings agency Moody's has upgraded Ahold Delhaize, citing positive synergies arising out of its recent merger.

In a statement, Moody's said that it has upgraded the long-term issuer ratings and senior unsecured ratings of Ahold Delhaize from Baa2 to Baa1.

The ratings upgrade also includes the retailer's subsidiaries, Ahold Finance USA, LLC, Delhaize Le Lion/De Leeuw Comm. VA, and Delhaize America.

Concurrently, Moody's has affirmed Ahold Delhaize's short-term ratings at Prime-2. The outlook on the ratings has changed to 'stable' from 'positive'.

'Earnings Growth'

"Our decision to upgrade the ratings of Ahold Delhaize reflects our view that it will continue to grow its earnings, thanks to the synergies arising from the Ahold-Delhaize merger and despite fierce competition in the US and in Belgium," said Vincent Gusdorf, a Moody's vice-president – senior analyst and lead analyst for Ahold Delhaize.

Gusdorf added that the upgrade "also factors in our expectation that the group will adapt shareholder remuneration and the funding of potential acquisitions to maintain credit ratios commensurate with its new rating".

Positive Moves

Moody's said that it believes that Ahold Delhaize's EBITDA is on track to rise by about 6% annually over the next two years, thanks to synergies arising out of the recent merger.

Margins are anticipated to rise to 8.5%-9% by 2019, compared with 8.1% in 2016 (pro forma of the merger).

"This increase makes the group one of the most profitable food retailers that Moody's rates in Western Europe, alongside Distribuidora Internacional de Alimentación [Baa3 stable]," the ratings agency added.

It also said that Ahold Delhaize's competitive position is 'holding up well' in the US, despite tough operating conditions.

On the downside, however, it said that high shareholder remuneration constrains the group's credit quality.

© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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