Fitch has also affirmed KCM's other ratings as follows:
--Long-term national rating at 'AAA(mex)';
--MXN2.3 billion unsecured CBs due 2014 at 'AAA(mex)';
--MXN1.5 billion unsecured CBs due 2015 at 'AAA(mex)';
--MXN800 million unsecured CBs due 2016 at 'AAA(mex)';
--MXN2.5 billion unsecured CBs due 2017 at 'AAA(mex)';
--MXN1.5 billion unsecured CBs due 2018 at 'AAA(mex)';
--MXN400 million unsecured CBs due 2019 at 'AAA(mex)';
--MXN2.5 billion unsecured CBs due 2020 at 'AAA(mex)';
--MXN1.75 billion unsecured CBs due 2023 at 'AAA(mex)'.
The Rating Outlook is Stable.
KEY RATING DRIVERS
The ratings reflect KCM's leading market position, strong cash flow generation, solid capital structure and liquidity position, proven debt-payment track record, and partial ownership by Kimberly-Clark Corporation (KMB), which is rated 'A' by Fitch with a Stable Outlook. KMB owns 47.9% of KCM.
STRONG BUSINESS PROFILE
KCM's solid business profile is supported by its brand portfolio, low cost structure, extensive distribution network, and access to KMB's technology and research and development capabilities. The ratings reflect KCM's ability to withstand competitive pressure, manage pricing and offset input cost pressure, all of which is based on its leading business position in
KCM's ratings reflect the company's strong credit profile and partial ownership by KMB, which maintains an equity stake of 47.9% in KCM. The company is a strategic investment for KMB, as its largest affiliate worldwide. KMB has five seats on KCM's 12-person board of directors. Because of this, KCM obtains from KMB recognized global brands, common processes and product technology, consistent financial reporting and controls, and worldwide purchasing and sourcing.
EBITDA MARGIN TO IMPROVE IN 2015
For the last 12 months (LTM) ended
STRONG CASH FLOW GENERATION
KCM has a long record of sizeable levels of EBITDA and operating cash flow generation, as well as positive pre-dividend free cash flow (FCF). Fitch expects cash flow from operations (CFO), main source supporting the company's liquidity and leverage, to remain ample over the medium term. For
LOW LEVERAGE; SOLID LIQUIDITY
The ratings include expectations that KCM's debt to EBITDA leverage should be around 1.5 times (x) in the short to medium term. For
Fitch views the liquidity position as solid. KCM's longstanding ability to steadily generate significant amounts of operating cash flow underpins its considerable liquidity and significant access to capital markets. For
With a highly stable business, considerable cash flow, low leverage, and strong liquidity changes in KCM's ratings are likely to be dependent on management's actions. Since KCM is not expected to change its financial policies in the near future, Fitch does not foresee any significant upgrade potential at this time.
Conversely, any change in the company's financial policies that results in sustained higher leverage above 2.0x debt to EBITDA in conjunction with significantly lower cash balances from historical levels, sustained lower profitability and negative FCF generation, could derive in negative rating actions. Also, any significant deterioration in KMB's brands, financial profile, or operational support to its Mexican affiliate could also pressure KCM's ratings. In addition, a downgrade in
Additional information is available at 'www.fitchratings.com'.
--'Corporate Rating Methodology Including Short-Term Ratings and Parent and Subsidiary Linkage' (
Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage
Alberto Moreno, +52 81 8399 9100
Source: Fitch Ratings
Most Popular Stories
- Alabama House Speaker Arrested on Felony Ethics Charges
- 'Fury' Blows 'Gone Girl' Out of the Box Office
- Microsoft's Cloud Platform Shines
- Turkey to Help Kurds Reach Fight in Kobani
- ISIS Seeks to Expand Terror War
- German Intelligence Blames Ukraine Rebels for MH17
- Perez Leads Push for Obama's Job Proposals
- 2016 Camaro Shrinks, Moves to Caddy Platform
- Prius Drivers Battle Stereotypes
- New Effort to Ban Child Labor From Tobacco Farms