Standard & Poor's Ratings Services said today it assigned its 'B-' long-term corporate credit and 'ruBBB-' Russia national scale ratings to Russian fruit importer JFC Group Co. Ltd. (JFC). The outlook is stable.
At the same time, Standard & Poor's assigned its 'B-' senior unsecured debt rating to JFC's recent $60 million loan participation notes issue maturing in 18 months.
JFC is a St. Petersburg-based leading fruit importer with its own network of distribution centers and terminals throughout Russia.
"The ratings on JFC are constrained by the company's high exposure to financial risk, marked by challenging liquidity, limited financial flexibility with considerable working-capital requirements, and high leverage," said Standard & Poor's credit analyst Lorenzo Sliusarev. "These risks are moderated by JFC's leading market position in Russia, robust business growth, Russia's favorable market potential, and the company's competitive advantage of a modern and well-established distribution and processing infrastructure."
The company's considerable business risk results from its aggressive expansion plans, lack of operating diversification, and exposure to volatile commodity markets, which are subject to political, economic, and competitive risks.
"Standard & Poor's expects JFC to focus on the careful management of its financial risks as it continues to rapidly increase scale and cash flow generation," added Mr. Sliusarev. "Given the company's heavy leverage and weak liquidity position, we expect JFC to remain focused on the prudent control of capital spending and operating costs while enhancing operating profitability and expanding its provision of value-oriented services."
If the company delivers a noticeable improvement in operating results while continuing to effectively address financial risks, the outlook could be revised to positive or the ratings raised. Conversely, a lack of continuing improvement in JFC's challenging liquidity position or the further deterioration of its limited financial flexibility and credit protection measures would lead to a negative rating action.