EthiFinance Ratings places its short-term corporate rating for Sodiaal under review for potential downgrade

Lyon, April 12, 2022 – Credit rating agency EthiFinance Ratings (Qivalio) has placed its short-term corporate rating for Sodiaal under review for potential downgrade.

As a dairy company, Sodiaal is highly exposed to the increase in its raw materials prices (agricultural raw materials and energy). The financial situation of the group slightly improved in 2021 thanks to cost-cutting measures, productivity gains, and a rise in selling prices, which offset the inflation in raw material costs deriving from another year of pandemic. In February 2022, Sodiaal negotiated annual price increases with retailers under the new EGALIM 2 legal framework. The EGALIM 2 law, approved by the French Parliament, aims to enhance negotiations between farmers, agribusinesses and retailers, in an attempt to secure fair prices along the entire food supply chain and preserve a decent wage for farmers. Unfortunately, the war between Ukraine and Russia – which started just before the end of February but after the EGALIM 2 negotiations – has seen raw material prices soar once again. This has led the French government to reopen the EGALIM 2 negotiations for a second round, which is expected to close in May 2022, along with the release of Sodiaal’s 2021 financial statements.

Our rating for Sodiaal is directly linked to the conclusions of round 2 of the negotiations. In fact, an inability to pass on the increase in raw materials costs would entail a significant deterioration of Sodiaal’s EBITDA margins going forward - they have historically been rather low (c.3.0%) - and could drive a downgrade of our rating.

As a consequence, we have decided to place our short-term rating for Sodiaal Union under review for a potential downgrade. In the meantime, our current rating remains valid.

Our methodologies used for this rating are available at:

• https://files.qivalio.net/documents/compliance/SrLongTermCorporateRatingMethodology.pdf
• https://files.qivalio.net/documents/compliance/SrShortTermCorporateRatingMethodology.pdf
• https://files.qivalio.net/documents/compliance/long-term-methodology-04March2022.pdf

Sodiaal

Sodiaal is a French cooperative specialised in the collection of milk, and its transformation and conditioning into various dairy products. It is the eighth-largest European group in the dairy products market in terms of revenues. Sodiaal owns well-known brands such as Entremont, Candia and Régilait and jointly owns its historical brand Yoplait with American company General Mills. The group generated c.€4.8bn of turnover and reported EBITDA of €121.5m for 2020.

EthiFinance Ratings

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 Ratings (Qivalio) 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 Ratings (Qivalio) is one of the rating agencies authorized by the Banque de France to rate NEU CP and NEU MTN programs.

Press contact

EthiFinance Ratings

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