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Rating action

Scope Ratings GmbH (Scope) has today affirmed the BBB-/Stable issuer rating of Norwegian agriculture company Felleskjøpet Agri SA. The company's senior unsecured debt rating has also been affirmed at BBB-.

The affirmation reflects the expectation of stable credit metrics in FY2025 due to ongoing working capital management and subsequent deleveraging. The stronger business risk profile, supported by the robust market position as a grain market regulator in Norway, outweighs the moderate financial risk profile.

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

Key rating drivers

The company's leading position in the Norwegian grain market, for which it acts as a market regulator mandated by the Norwegian government, as well as Felleskjøpet's strong market share in tractors, fertilisers, seeds and feed concentrates, benefit the company's credit profile. The company's overall relatively stable and diversified business model, supported by a cooperative corporate structure and retail outlets, also benefits its credit profile.

Business risk profile: BBB- (unchanged). Felleskjøpet’s business risk profile is supported by protective measures for the Norwegian agricultural sector, including tariffs on selected foreign inputs and its leading position in the Norwegian grain market, where it acts as a market regulator. However, Felleskjøpet’s geographical diversification is limited to Norway (80% of revenues) and Sweden (20%), resulting in a relatively strong dependency on the Norwegian agricultural sector. The company has a diverse product offering along the agricultural value chain, reducing its reliance on any single product. The company has a diverse customer base of over 37,000 farmers, who are also ‘owners’, in addition to all its retail and commercial customers. Felleskjøpet's overall profitability margins are relatively stable but low. There is a more mixed picture at segment level, with the bakery segment boasting the highest margins and the agriculture segment the lowest. However, the latter is explained by the fact that the company serves its owners and customers (the farmers) in the best possible way, and by its nature as a cooperative for which profit maximisation is not the main focus.

Financial risk profile: BB+ (unchanged). The financial risk profile is considered to be slightly weaker than the business risk profile. Leverage, as measured by Scope-adjusted debt/EBITDA*, stood at 3.4x in 2024 following a grain sale transaction worth around NOK 190m in December, which was intended to further improve working capital management. Scope expects leverage to reach 3.2x by the end of 2025, with a repetition of a grain sale transaction in the fourth quarter, still at the higher end of the company's comfort zone of 2.0x-3.5x, before deleveraging below 3x thereafter. Scope also points out that the seasonality of working capital and cash levels leads to significant swings in leverage throughout the year, which is well understood by investors and banks (i.e. covenants are only measured in Q2 and Q4), but reiterates the need for a conservative assessment of credit metrics. Interest coverage is expected to be 4.5x in 2025, recovering to levels above 5x in subsequent years due to an improvement in EBITDA while debt and interest payments decline slightly. Cash flow cover remains the weakest aspect of the financial risk profile due to significant volatility caused by working capital fluctuations and currently elevated capital expenditure linked to the company’s new ERP system. Following strong improvements in working capital management in 2024, the FOCF/debt ratio was a healthy 10%. However, as expected changes in working capital are more modest going forward, Scope forecasts a ratio below 5% for 2025 and 2026, with an improvement above this threshold expected by 2027.

Liquidity: adequate (unchanged). Liquidity is deemed adequate due to good access to banks and domestic bond markets, as well as short-term debt coverage consistently exceeding 200% (including undrawn credit lines).

Supplementary rating drivers: credit-neutral (unchanged). Scope has not made any adjustments for supplementary rating drivers. While the company’s leverage target of 2.5x–3.0x in the financial policy is supportive, the company is currently still outside this target. In terms of ownership, governance and structure, some of the cooperative ownership elements were considered positive factors for the business risk profile, as was the supportive element of being a market regulator in grain markets (ESG factor).

One or more key drivers of the credit rating action are considered an ESG factor.

Outlook and rating sensitivities

The Stable Outlook reflects Scope’s expectation that Felleskjøpet will maintain its leading market position and continue to play an important role in the overall value chain for Norwegian farmers. This assumes no change to the cooperative structure, regulatory conditions or protective measures applicable to the Norwegian agricultural sector. Financially, Scope expects leverage to remain below 3.5x in FY2025 and recover to below 3x thereafter, while FOCF/debt is expected to improve to above 5% in the medium term. This outlook is supported by the company's ongoing efforts to improve working capital management of inventories and payables, which are already yielding results and are expected to continue doing so.

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

1. Scope-adjusted leverage sustained below 2.5x.
    
2. A track record of cash flow that has consistently stabilised above 5%, with commensurate liquidity financial policies, including around cash and other liquidity buffers, as well as maturity profiles.

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

1. Leverage sustained at or above 3.5x.
    
2. FOCF/debt below 5% on a sustained basis.

Debt ratings

Scope has affirmed the ratings for senior unsecured debt at BBB-, in line with the rating action on the underlying issuer rating.

Environmental, social and governance (ESG) factors

In terms of ownership, governance and structure, some of the cooperative ownership elements were considered positive factors for the business's risk profile. In addition, the cooperative's role as a market regulator in grain markets was seen as a supportive factor.

All rating actions and rated entities

Felleskjøpet Agri SA

Issuer rating: BBB-/Stable, affirmation

Senior unsecured debt rating: BBB-, 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; Retail and Wholesale Rating Methodology, 25 June 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: Thomas Faeh, Executive Director
Person responsible for approval of the Credit Ratings: Karl Yuan Pettersen, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 25 January 2022. The Credit Ratings/Outlook were last updated on 16 January 2025.

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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