EthiFinance Ratings has reaffirmed its SR1 short-term rating to the €1.5bn NEU CP instrument of Sonepar

Rating rationale

EthiFinance Ratings has analysed the credit profile of Sonepar in order to assign its short-term rating. The outcome is an SR1 short-term rating, the second-highest grade in EthiFinance Ratings ‘s rating scale.

Credit profile

Sonepar benefits from a strong business profile as the world’s largest B2B distributor of electrical products, solutions and related services. The company operates in four continents, with the bulk of sales generated in Europe and North America, where the group has leading market positions. Our rating is supported by Sonepar’s large and diversified product offering, its strong local footprint and distribution network, and limited customer concentration. Sonepar has gone a long way to digitalizing its operations – and on this front the group is ahead of peers, which is expected to bring further efficiency gains and support margins.

The industry is anticipating positive long-term trends on the back of rising energy needs and demand for electrical appliances, paving the way for further growth in all regions where the group is present, including in emerging markets where B2B electrical product distribution has had a low penetration rate so far. We expect Sonepar to benefit from these trends, especially in fragmented markets where the group is already present and well positioned to drive market consolidation.

Sales are subject to some degree of cyclicality due to the group’s exposure to the construction and renovation end-markets for residential and commercial buildings, and to various other industries. Mitigating this, Sonepar has displayed resilience in terms of both operating margins and cash generation during previous economic downturns, and has outperformed peers over the past few years. It has consistently achieved a high level of free cash flow, a trend that we expect to continue, which provides scope for deleveraging beyond this year and the impact of the coronavirus pandemic.

Our rating factors in Sonepar’s relatively modest leverage, and strong commitment to its prudent financial policy. We expect Sonepar to retain its current financial policy over the forecast period.

Liquidity profile

The liquidity profile is excellent. This is driven by the significant amount of cash on balance sheet, large undrawn committed credit lines, the long-term debt maturity profile, and our expectation that Sonepar will continue to generate strong free cash flow after dividends.

Our methodologies used for this rating are available at:

Sonepar

Sonepar is an independent family-owned company with global market leadership in B-to-B distribution of electrical products, solutions and related services. Through a dense network of 100 brands spanning 40 countries, the Group has an ambitious transformation agenda to become the first global B-to-B electrical distributor to provide a fully digitalized and synchronized omnichannel experience to all customers. Drawing on the skill and passion of its 45,000 associates, Sonepar had sales of €26.4 billion in 2021. Sonepar makes its customers’ lives easier, over the counter, visiting customers, by phone or online, – however we’re needed.

www.sonepar.com

EthiFinance

EthiFinance is an innovative European rating, research and advisory group serving sustainable finance and sustainable development. It provides investors, companies and organizations with solutions to the challenges of financing as well as environmental and societal transformation. Created in 2017, EthiFinance is the result of the merger between Spread Research and EthiFinance, French financial and extra-financial rating agencies both founded in 2004. EthiFinance provides its services to a wide range of leading international clients under the brands Spread Research (independent credit research), EthiFinance Ratings (credit rating agency), EthiFinance Analytics (Risk Modelling), and EthiFinance (extra-financial rating and advisory agency).

EthiFinance operates as a credit rating agency registered with and regulated by the European Securities and Markets Authority (ESMA) since July 2013, and as an External Credit Assessment Institution (ECAI). Our ratings are recognized by the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA), and can be used for the internal calculation and models of banks and insurance companies. Under the EthiFinance Ratings brand, EthiFinance provides financial analysis, assigns credit ratings for issuers, and provides credit opinions for financial operations (particularly for private debt funding operations or for the purpose of accounting/tax documentation). EthiFinance is one of the rating agencies authorized by the Banque de France to rate NEU CP and NEU MTN programs.

Press contact

EthiFinance

Elie Hériard-Dubreuil / elie.heriard-dubreuil@ethifinance.com

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