The latest information on the rating, including rating reports and related methodologies, is available on this LINK.

Rating action

Scope Ratings GmbH (Scope) has today affirmed the A-/Stable issuer rating on Tine SA. Concurrently, the senior unsecured debt rating and short-term debt rating have been affirmed at A- and S-1, respectively.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Business risk profile: BBB. Tine’s business risk profile remains supported by its exposure to non-discretionary consumer products, primarily dairy, and its high market shares and well-known brands in Norway. The company’s market shares are underpinned by protective measures from agricultural regulations such as duties on imports and Tine’s country-wide processing and distribution network. Diversification in terms of product offering, suppliers and sales channels is considered adequate. The main constraints include Tine’s low diversification of cash flow generation outside Norway and moderate profitability in the context of the broader consumer products industry.

Financial risk profile: A+. Tine’s strong financial risk profile continues to support its creditworthiness. Credit metrics developed positively in 2023, with leverage (Scope-adjusted debt*/EBITDA) decreasing to 0.9x from 1.4x at YE 2022 and Scope-adjusted free operating cash flow/debt increasing to above 35%. Scope sees Tine’s leverage target (net debt/EBITDA below 2x) as a constraint with regards to further financial risk profile upside, given the risk that the company could at some point deploy its leverage headroom. For reference, reported net debt/EBITDA stood at 0.8x at YE 2023.

Scope-adjusted debt decreased to NOK 2.9bn in 2023 (NOK 3.9bn in 2022). This was supported by higher-than-expected operating results, lower net capex compared to historical years, and reduced working capital needs. With a relatively flat trajectory in Scope-adjusted EBITDA expected over the next few years, Scope anticipates that Tine will have deleveraging ability and therefore good capacity for strategic investments and subsequent payouts to members. Overall, no material external financing needs are expected over the short to medium term besides refinancing.

Scope expects EBITDA interest cover to stay at comfortable levels of above 10x. As regards the impact on the financial risk profile, we note that interest cover is given a lower weighting than other credit metrics in Scope’s assessment of high investment-grade issuers like Tine.

Liquidity: adequate. Tine’s liquidity is considered to be adequate as the company's available cash sources cover its short-term debt over the next 12-18 months from YE 2023 by well over 200%. Available cash and cash equivalents were NOK 1.7bn at YE 2023. Liquidity sources at YE 2023 also comprised undrawn committed credit lines of NOK 0.8bn under the NOK 1.2bn revolving credit facility maturing in 2026, which we expect will be refinanced. This compares to debt maturities of NOK 1.3bn in 2024 and NOK 0.1bn in 2025.

With an equity ratio of 54.9% as of April 2024, Tine had ample headroom under its financial covenant (>40%). Scope expects Tine to maintain sufficient headroom under this covenant.

Supplementary rating drivers: credit-neutral. Scope sees no impact from supplementary rating drivers. Tine has updated its financial policy since the previous rating review, involving a revised payout ratio from 50%-75% to 50%-85% of net profit. This is not considered a concern given Tine’s increased financial flexibility lately. The long-term leverage target (net debt/EBITDA) is unchanged at below 2x and the target equity ratio of at least 45% is also unchanged.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s expectation that Tine will continue to hold high domestic market shares in the main dairy categories and maintain good product diversification. The Stable Outlook is further based on the expectation that financial leverage will remain conservative, supported by a stable operating environment (e.g. no adverse changes to agricultural regulations) and resilient financial performance. Scope therefore believes that Tine is likely to keep some headroom to the maximum threshold of its leverage target (net debt/EBITDA below 2x) in the foreseeable future.

The upside scenarios for the ratings and Outlook are (individually or collectively):

1. Introduction of more conservative financial targets in tandem with a move towards a net cash position
    
2. Improved business risk profile via more international diversification and/or stronger profitability

The downside scenarios for the ratings and Outlook are (individually or collectively):

1. Weaker financial risk profile, as exemplified by Scope-adjusted debt/EBITDA sustained at around 2x or above
    
2. Material reduction in domestic market shares and/or falling profitability, leading to a weaker business risk profile

Debt ratings

The senior unsecured debt rating has been affirmed at A-, in line with the issuer rating.

The S-1 short-term debt rating has been affirmed, based on the issuer rating of A-/Stable and supported by Tine’s better-than-adequate short-term debt coverage and better-than-adequate access to bank and capital markets.

Environmental, social and governance (ESG) factors

Overall, ESG factors have no material impact on this credit rating action.

All rating actions and rated entities

Tine SA

Issuer rating: A-/Stable, affirmation

Senior unsecured debt rating: A-, affirmation

Short-term debt rating: S-1, affirmation

*All credit metrics refer to Scope-adjusted figures.

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for these Credit Ratings and/or Outlook, (Consumer Products Rating Methodology, 3 November 2023; General Corporate Rating Methodology, 16 October 2023), are available on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at https://scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA): http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at https://www.scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on https://scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and third parties.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlooks and the principal grounds on which the Credit Ratings and/or Outlooks are based. Following that review, the Credit Ratings and/or Outlooks were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
Lead analyst: Per Haakestad, Senior Specialist
Person responsible for approval of the Credit Ratings: Thomas Faeh, Executive Director
The Credit Ratings/Outlook were first released by Scope Ratings on 16 June 2022. The Credit Ratings/Outlook were last updated on 21 June 2023.

Potential conflicts
See www.scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use/exclusion of liability
© 2024 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin.