CHICAGO--(BUSINESS WIRE)--Fitch Ratings expects Compania Cervecerias Unidas S.A.'s (CCU; IDR 'A'/Outlook Stable) joint operation with Colombian beverage company, Postobon S.A. (Postobon), to have a neutral impact on its credit profile. CCU and Postobon will be equal owners of Central Cervecera de Colombia S.A.S. (Central), which will produce, market, and distribute beer in Colombian market.
Fitch views CCU's expansion into Colombia favorably. This is due to the market's growth potential, CCU's strong business know-how, Postobon's knowledge of the local market and its strong distribution network, and Heineken's brand strength.
CCU's entrance into the Colombian market is in line with its strategic plan for 2014-2016. CCU's 'A' rating already considers possible M&A activity. To prepare for growth opportunities, CCU raised additional capital of close to USD700 million during 2013; CCU had USD300 million in cash and equivalents as of Sept. 30, 2014. CCU has invested in a land in Chile to prepare for future expansion, it prepaid USD 117 million local currency denominated bonds and acquired 34% participation in Bebidas Bolivianas for USD22.9 million in May 2014.
Both shareholders will each provide USD200 million to finance the construction and related investments for a plant outside of Bogota, Colombia, with a capacity of 3 million hectoliters. The new plant will be constructed over the course of three to four years. Fitch considers that CCU's USD200 million contribution towards Central's new plant over this time-frame is manageable. Central Cervecera de Colombia will have the distribution rights to the partners' brands, and the exclusive rights to produce, market and distribute Heineken beer in Colombia.
The Colombian beer market has a size of 23 million hectoliters and a per-capita consumption of 48 liters, compared to 41 liters in Chile. Bavaria (SABMiller) is the dominant player in the Colombian market with a share of 98%. Consumption is largely focused in main-stream brands and reaches more than 70%, which leaves room for growth in the premium segment.
Postobon is Pepsi's licensed bottler in Colombia and has a 42% market share of the carbonated soft drink (CSD) market. Its brand portfolio includes 35 brands across CSD, juice, water, isotonic, and energy drink segments. Postobon's distribution network reaches 490,000 clients. It is part of the Ardila Lulle Colombian economic group.
CCU is the leader in the Chilean beer market with a 78% market share, and also has important shares of the water and CSD markets. It also has small operations in Argentina, Paraguay and Uruguay, which contribute about 15% to consolidated EBITDA of USD436 million generated during the last-12 months ended on Sept. 30, 2014. CCU's consolidated debt totaled USD347 million and cash and equivalents was USD185 million, resulting in 0.8x debt/EBITDA and 0.1x net debt/EBITDA, as of Sept. 30, 2014.
Fitch currently rates CCU as follows:
--Foreign currency and local currency Issuer Default Rating (IDR) at 'A';
--Long-term National Scale Rating at 'AA+(cl)';
--Senior unsecured notes at 'AA+(cl)';
--Long-term equity rating at 'Nivel 1(cl)'.
The Rating Outlook is Stable.
Additional information is available at 'www.fitchratings.com'.
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