Fitch: Growing Global Protein Demand Drives Cash flow and Leverage

Tools

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has published a special report titled 'Global Industry Overview: A Growing Appetite for Protein'. The report provides an overview of credit trends and rating considerations for protein firms in Brazil, the U.S., and the Commonwealth of Independent States (CIS).

Fitch concludes the report with an evaluation of the impact of volatile feed and livestock prices, potential declines in worldwide demand, foreign exchange fluctuations, and inflation on the global protein industry.

The Issuer Default Ratings (IDR) and Rating Outlooks for companies discussed in this report are as follows:

--Tyson Foods, Inc. 'BBB-'; Outlook Stable;

--BRF Brasil Foods S.A. 'BBB-'; Outlook Stable;

--JBS S.A.: 'BB-'; Outlook Stable;

--Smithfield Foods, Inc. 'B+'; Outlook Positive;

--Marfrig Alimentos S.A. 'B+'; Outlook Stable;

--Minerva S.A. 'B+'; Outlook Stable;

--MHP S.A. 'B'; Outlook Stable;

--Agri Business Holding Miratorg LLC 'B'; Outlook Stable;

--Avangardco Investments Public Limited 'B'; Rating Watch Negative.

According to the report, free cash flow generation has been a major concern for Brazilian issuers. 'We expect free cash flow at Marfrig, Minerva, and JBS to become positive by 2012 due to cost cutting and synergies from the integration of past acquisitions,' said Viktoria Krane, Director at Fitch. 'Failure to generate free cash flow would continue to delay needed deleveraging and could pressure ratings.'

U.S.-based Tyson and Smithfield are performing in-line or better than Fitch had anticipated, despite higher cost grain and livestock purchases, as performance in beef and pork remain strong. Stable debt levels, the maintenance of adequate liquidity and effective hedging could result in an additional upgrade for Smithfield. Smithfield's ratings were upgraded and its outlook was revised to Positive earlier in 2011.

Protein firms in the CIS have higher margins than those in the U.S. and Brazil but that profitability has not translated into greater cash conversion. Fitch expects leverage to deteriorate for some of these firms in 2011-2012 due to aggressive capital expenditure plans. Currency mismatch remains a particular concern for Ukrainian issuers as debt is mainly denominated in U.S. dollars while revenue remains concentrated in the growing domestic market. However, Fitch expects the share of exports to increase as current investments underway mature. Fitch expects to be able to remove Avangardco's from Rating Watch Negative once there is clarity on the transfer of Mr. Oleg Bahkmayuk's 77.5% stake in Avangardco to Ukrlandfarming PLC, Ukrlandfarming's financial profile, intra-group pricing policies, and the extent of the ring-fencing of Avangardco.

The special report 'Global Industry Overview: A Growing Appetite for Protein' is available at 'www.fitchratings.com'.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research: Global Industry Overview: A Growing Appetite for Protein (Brazil, U.S., CIS)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=654116

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

CONTACT:

Fitch, Inc.
Viktoria Krane, +1-212-908-0367
Director
One State Street Plaza
New York, NY 10004
or
Carla Norfleet Taylor, CFA, +1-312-368-3195
Director
or
Pablo Mazzini, +44 20 3530 1021
Senior Director
or
Gisele Paolino, +55 21 4503 2600
Director
or
Media Relations
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com