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Rating action

Scope Ratings GmbH (Scope) has today affirmed its BBB/Stable issuer rating for Danish industrial conglomerate Schouw & Co (Schouw). Scope has also affirmed the BBB rating on senior unsecured debt as well as the short-term debt rating of S-2.

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- (unchanged). Scope categorises Schouw as an industrial conglomerate. The group has a portfolio of six mainly wholly owned companies with operational and financing integration. BioMar remains the dominant portfolio company in terms of revenue and EBITDA contribution (50% EBITDA share in 2024), followed by GPV (20%).

Schouw's good overall market position is supported by the strong position of BioMar in the global market for salmon feed. BioMar’s position is only weakened by its limited exposure to the fast-growing shrimp and prawn feed segment as well as its still-low presence in the large Asian market. Schouw's market position is constrained by the significant EBITDA contribution from companies that are primarily regional players with relatively limited market power.

Scope sees Schouw's good diversification as the main support for its business risk profile. This assessment is based on the wide range of products and services offered by its six heterogeneous companies as well as a granular customer base – with no single customer accounting for more than 5% of the group's consolidated revenue. The reliance on BioMar is mitigated by the low cyclicality of the fish feed business. Historically, cycles in the salmon market have been driven by supply and demand rather than by GDP. However, risks can arise from biological factors such as algal blooms, the loss of customers and the backward integration of BioMar's customers. In view of some concentration within its subsidiaries, Schouw has a moderate international presence, in Scope’s view. With a share of around 5% of total sales, 40% to 50% of which are generated in the US itself, exposure to the US and thus the risk from tariffs is relatively low.

Schouw's moderate operating profitability still restrains its business risk profile, despite a further slight improvement to 8.5% in 2024 (up from 7.8% in 2023). The group’s overall profitability continues to be largely determined by that of BioMar, given its relative size. However, the importance of GPV to Schouw's profitability has increased following the acquisition of Enics. BioMar's commercial excellence programme has improved its profitability, helping to increase Schouw's overall EBITDA margin since 2022. In recent years, GPV's profitability has been affected by the integration costs of Enics' activities, rising component and material prices, and lower capacity utilisation due to reduced demand.

Scope anticipates a slight decline in Schouw’s EBITDA to around DKK 2.9bn in 2025, down from DKK 3.0bn in 2024. This is based on BioMar's weaker profitability, as evidenced by the H1 2025 results, and a fairly stable revenue assumption of around DKK 34.7bn (down 0.7% in H1 2025 YoY). Scope’s revenue forecast reflects the expected increase in revenue at BioMar and HydraSpecma, offset by a decrease in revenue from other businesses. For 2026, Scope expects EBITDA to increase to around DKK 3.0bn, driven by the higher projected revenue, up to DKK 35.4bn, and Schouw’s slightly higher EBITDA margin.

Financial risk profile: BBB+ (unchanged). Schouw’s financial risk profile reflects a combination of strong leverage and debt protection together with moderate cash flow cover weighed down by volatility in free operating cash flow (FOCF). It also reflects Schouw’s growth strategy, with a focus on debt-financed M&A, mitigated by relatively disciplined capital allocation (internal leverage cap of 2.5x) as well as proven balance sheet recovery post M&A.

In 2024, Schouw was well on track to improve its balance sheet following the 2022 acquisition of Enics, accompanied by weak FOCF in 2022-23. Debt fell to DKK 5.6bn at YE 2024, down from a peak of DKK 6.6bn at YE 2023. This was thanks to the absence of M&A activity and strong FOCF, partly offset by dividend payments (DKK 408m) and share buybacks (around DKK 245m). Leverage as measured by debt/EBITDA improved to 1.9x in 2024, down from 2.3x in 2023. A potential BioMar listing is not expected until the first half of 2026 and, based on Scope’s discussions with Schouw, any substantial M&A is unlikely for the rest of 2025. The rating agency therefore anticipates a strong debt/EBITDA ratio of around 1.5x in 2025, supported by positive FOCF.

Schouw expects a potential listing of BioMar to take place in H1 2026 at the earliest, subject to market conditions and further analysis. Scope believes the positive effect on Schouw’s leverage would be temporary as: i) the rating agency understands that Schouw will not adjust its financial policy, particularly with regard to the leverage cap of up to 2.5x; and ii) acquisitions are an integral part of Schouw's growth strategy. While leverage can fluctuate – decreasing in periods without M&A activity (as seen in 2024 and reflected in Scope’s numbers) and increasing due to M&A activity – Scope has based its leverage assessment on a debt/EBITDA ratio of between 1.5x and 2.0x, which the rating agency considers to be the historical average for Schouw.

The interest coverage ratio – as measured by EBITDA to net interest – has remained good but deteriorated slightly to 6.4x in 2024 from 6.9x in 2023, reflecting higher interests due to negative forex effects. Scope anticipates lower interests in 2025-26 than in 2024 and projects strong interest coverage of well over 7x for these years. This is based on current interest rates, an expected debt reduction and the fact that over 80% of Schouw’s debt is floating rate.

Schouw's FOCF has proved to be quite volatile, with negative figures in some years, mainly due to fluctuations in net working capital (NWC), particularly at BioMar and GPV. In 2024, FOCF increased significantly to DKK 1.6bn, up from DKK 0.7bn in 2023, thanks to a reduction in NWC (primarily due to the progress made by BioMar), coupled with a YoY decrease in capex. This substantially increased Schouw's generally volatile cash flow coverage (FOCF/debt), which reached 29% in 2024 (up from 10% in 2023). Assuming no major fluctuations in NWC and moderate capex in 2025-26, Scope anticipates FOCF of around DKK 1.8bn in 2025 and DKK 0.9bn in 2026. Despite the anticipated improvement in 2025–26, Scope continues to assess cash flow cover as moderate, given its historical volatility and the fact that likely M&A activity has not been reflected in this figure.

Liquidity: adequate (unchanged). Scope considers Schouw’s liquidity profile to be adequate. Available liquidity sources, in particular cash on the balance sheet, undrawn credit lines under the syndicated bank facility and projected FOCF, cover upcoming cash uses in the next 12-18 months by well over 150%. The rating agency quantified liquidity risk by considering BioMar’s use of reverse factoring of DKK 939m at YE 2024 (2023: DKK 764m), which is recognised in the balance sheet under trade payables.

Schouw has two financial covenants. One leverage covenant at a maximum of 3.25x (+0.5x M&A step-up) and an equity ratio covenant at a minimum of 30%. In 2024, the group complied with its covenants with ample headroom and Scope’s base case foresees that this will continue to be the case.

Supplementary rating drivers: credit-neutral (unchanged). Scope has a neutral view of Schouw’s capital allocation policy, supported by its commitment to debt/EBITDA of less than 2.5x (Schouw’s calculation).

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s expectation that debt/EBITDA will improve further in 2025, moving towards the low end of the 1.5x-2.0x range (a range Scope considers a sustainable average for Schouw) supported by projected FOCF and the absence of large, debt-financed M&A. The Outlook also reflects the potential positive impact on Schouw's leverage from BioMar's IPO in 2026 – although Scope believes this would only be temporary given the group’s growth strategy.

The upside scenario for the ratings and Outlook is:

1. Debt/EBITDA sustained at around 1.5x.

The downside scenario for the ratings and Outlook is:

1. Debt/EBITDA sustained at around 2.5x.

Debt ratings

The group’s debt is currently managed centrally apart from leasing debt and other credit lines. Subsidiaries are mostly financed at holding company level by way of a structure of intra-group loans through cash pools. There are cross-guarantees (Schouw and six companies) for the centrally managed debt.

Scope has affirmed the BBB rating on Schouw's senior unsecured debt, in line with the issuer rating.

Scope has also affirmed the S-2 short-term debt rating, based on adequate liquidity and the BBB/Stable issuer rating. Scope considers Schouw's standing, particularly in the Nordic capital market, to be adequate given its long-term presence on the capital market. The rating agency also views Schouw's banking relationships as adequate. Schouw mainly raises funds from four major banks: Danske Bank, DNB, Nordea and HSBC.

Following a potential IPO, Scope expects BioMar to establish its own financing without any guarantees from Schouw for debt issued by BioMar. In this case, all debt category ratings would refer only to debt issued by Schouw.

Environmental, social and governance (ESG) factors

Scope sees no company-specific ESG factors with a substantial impact on credit risk.

Scope sees moderate governance risk arising from the management of a very diverse portfolio of companies operating in various industries. This risk is mitigated by the fact that the daily business of each portfolio company is not managed centrally but at the individual company’s level.

Schouw now uses share buybacks more frequently in addition to dividends. Nevertheless, Scope considers the interests of shareholders and creditors to be well balanced, as payments to shareholders do not have a sustained negative impact on Schouw's overall balance sheet.

In 2019, the Chilean branches of BioMar and its competitors Skretting, EWOS and Salmofood were accused of setting the sale prices of salmonid food between at least 2003 and 2015. In its 2024 annual report, no provision was recognised concerning the claim submitted at YE 2024, only a contingent liability. Based on the press, BioMar, Skretting and Salmofood face combined fines of up to USD 78.5m related to Chile's long-running salmon feed price collusion case. Scope does not believe that this investigation has any immediate relevance for the credit rating.

All rating actions and rated entities

Schouw & Co.

Issuer rating: BBB/Stable, affirmation

Senior unsecured debt rating: BBB, affirmation

Short-term debt rating: S-2, 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 methodology used for these Credit Ratings and/or Outlook, (General Corporate Rating Methodology, 14 February 2025), is available on 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 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 scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA):registers.esma.europa.eu/cerep-publication/. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at 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 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 Scope Ratings' internal sources.
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 Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings and/or Outlook 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: Gennadij Kremer, Director
Person responsible for approval of the Credit Ratings: Sebastian Zank, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 5 September 2023. The Credit Ratings/Outlook were last updated on 5 September 2024.

Potential conflicts
See 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
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