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Rating action

Scope Ratings GmbH (Scope) has affirmed the B+/Stable issuer rating of Hungarian pork processing group Kometa 99 Zrt. (Kometa). Scope has also affirmed the issuer’s B+ senior unsecured debt rating.

The rating action also addresses the correction of previous calculation errors which materially affected credit metrics and its components. The errors related to the computation of Scope-adjusted EBITDA*, interest, funds from operations (FFO), debt, and consequently free operating cash flow (FOCF). The errors had a slightly positive impact on the credit metrics, but not to the extent that it would have a rating impact.

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

Key rating drivers

Business risk profile: BB- (unchanged). Kometa’s moderate business risk profile continues to benefit from the characteristics of the non-discretionary consumer goods segment (low cyclicality, medium market entry barriers and low substitution risk). The assessment is also supported by the group’s high domestic market shares for its fresh meat products (it is the third largest seller in terms of total volumes sold and the market leader in modified atmosphere-packaged fresh meat), its moderate geographical diversification (although domestic sales still accounted for 56% of revenues in 2024) and the stabilisation of its operating profitability volatility thanks to the acquisition of Triagro, a Hungarian pig breeder. However, the business risk profile is still constrained by several factors, including: (1) the group’s small size (HUF 95.5bn in revenue in 2024, up 2% YoY); (2) the tail risk associated with asset concentration in a single plant; (3) moderate dependence on certain customers (Top 5 customers account for 36% of 2024 sales); (4) exposure to a single product (pork) with limited diversification into processed poultry; (5) low profitability, which is heavily dependent on livestock prices and under pressure from large international food retailers; and (6) relatively weak brand value, due to a reliance on private-label agreements for fresh meat.

EBITDA increased to HUF 5.6bn in 2024, up from HUF 4.0bn in 2023. At the same time, the group’s EBITDA margin improved to 5.9% from 4.2%. This improvement is due to the consolidation of Triagro and the efficiency measures implemented to increase the volume of pigs bred within the group (currently estimated at 15%). The countercyclical nature of the agribusiness and the slaughtering activities leads to lower volatility in the group’s profitability. Mainly due to the anticipated increase in the volume of pigs bred for internal capacity, Scope forecasts a gradual increase in Kometa’s EBITDA margin, which is expected to stabilise at around 6.5% by 2027. This stabilisation is also supported by Kometa’s investment in energy-efficient technologies to reduce energy costs.

Financial risk profile: B+ (unchanged). Kometa’s weak financial risk profile reflects the high leverage and very weak cash flow cover caused by its capital-intensive investment project, which are only partly offset by a good interest cover and adequate liquidity.

In 2024 credit metrics deteriorated as gross debt increased to HUF 28.1bn from HUF 22.5bn in 2023 and cash was deployed to execute on the group’s investment programme, primarily putting pressure on leverage and cash flow cover. This triggered a change in how cash netting is treated, with only 25% of cash netted going forward, as opposed to 45% netted in previous years. This is because large part of the available cash will be used up to finance the investment while also leaving a meaningful amount for liquidity purposes. The combined effect of these factors led to debt/EBITDA deteriorating to 4.5x in 2024, up from 4.0x in 2023, and FFO/debt decreasing to 19% in 2024, down from 29% in 2023. With the intensification of the investment programme, Kometa’s cash flow cover turned significantly negative, and Scope forecasts that it will remain at very weak levels until the end of the CAPEX phase (estimated to last until 2027). However, as the majority of the investments are pre-financed, the agency expects gross debt to remain relatively stable. Scope forecasts that the improvement in Kometa’s profitability will drive deleveraging and that debt/EBITDA will improve towards 3.5x and FFO/debt will increase towards 25% in the next two years.

EBITDA interest cover remains Kometa’s strongest credit metric, supported by the substantial interest income generated by the group’s ample cash and equivalents reserves. Although Scope expects interest income to decline as cash reserves are utilised and interest rates may decrease, it still expects interest cover to remain strong in the medium term. The agency forecasts the metric will decrease towards 6.0x by 2027, down from 8.5x in 2024.

Liquidity: adequate (unchanged). Scope considers liquidity to be adequate despite forecasted internal and external liquidity ratios of below 100% for 2025 due to the large amount of maturing credit lines (HUF 11.6bn) and the group’s capital-intensive investment programme. This is because (1) the majority of credit lines have been renewed by October 2025 thanks to the group’s strong banking relationships and (2) the investments are expected to be fully pre-financed. Liquidity sources are HUF 16bn of available cash and equivalents as at YE 2024 and HUF 0.4bn of undrawn credit lines as at June 2025. The liquidity profile turns solid after 2025 as projected liquidity ratios are forecast above 110% for 2026 and 2027.

Scope highlights that Kometa’s senior unsecured bond issued under the Hungarian National Bank’s Bond Funding for Growth Scheme has a covenant requiring the accelerated repayment of the outstanding nominal debt amount (HUF 12bn) if the debt rating of the bonds stays below B+ for more than two years (grace period) or drops below B- (accelerated repayment within 15 days). Such a development could adversely affect the company’s liquidity profile. There is limited rating headroom as the senior unsecured bond is rated B+, the same level as the issuer rating. Given the limited rating headroom, the group must at least maintain its current credit profile to avoid triggering the rating-related covenant.

Supplementary rating drivers: credit-neutral (unchanged). The rating has no adjustments related to financial policy, peer group considerations, parent support, or governance and structure.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s expectation that Kometa’s leverage (debt/EBITDA) will remain well below 5x during its capital-intensive investment period, which is estimated to last until 2027, resulting in significantly negative cash flow cover over the next two years. Scope’s base case scenario assumes a HUF 10bn equity injection in Q4 2025 and does not include any large-scale M&A activity that could put pressure on Kometa’s leverage.

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

1. Significant increase in size, paired with a substantially lower concentration risk;
    
2. Debt/EBITDA improving to or below 3.5x on a sustained basis;
    
3. Recurring positive FOCF/debt.

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

1. Debt/EBITDA deteriorating to above 5.0x on a sustained basis;
    
2. EBITDA interest cover weakening to below 4.0x.

Debt rating

In February 2022, Kometa issued a HUF 12bn senior unsecured bond (ISIN: HU0000361464) through the Hungarian Central Bank’s Bond Funding for Growth Scheme. The bond proceeds were used for refinancing loans and are earmarked for investment capex to expand production capacity. The bond has a tenor of 10 years and a fixed coupon of 5%. The bond repayment schedule is in six instalments with 10% of the face value payable yearly starting in the fifth year and a balloon payment of 50% at maturity. In addition to the rating deterioration covenant, the bond covenants include non-payment, insolvency proceedings, cross-default, change of control, dividend-restriction, pari-passu, negative pledge and debt covenants.

Scope has affirmed the senior unsecured debt rating of Kometa at B+. Scope’s recovery expectations are based on the liquidation value of a hypothetical default scenario in 2027 and reflect a ‘superior’ recovery. However, the debt rating is capped at the issuer rating level due to execution risks related to the group’s investment project, the risk of additional secured debt entering the financing structure and the presence of real estate pledges for the state-linked subsidy providers.

Environmental, social and governance (ESG) factors

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

All rating actions and rated entities

Kometa 99 Zrt.

Issuer rating: B+/Stable, affirmation

Senior unsecured debt rating: B+, 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, (General Corporate Rating Methodology, 14 February 2025; Consumer Products Rating Methodology, 31 October 2025), are 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: Vivianne Kápolnai, Associate Director
Person responsible for approval of the Credit Ratings: Philipp Wass, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 21 December 2021. The Credit Ratings/Outlook were last updated on 12 November 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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