S&P changes ELO outlook to negative

S&P said it changed its outlook for ELO (formerly Auchan Holding) to negative from stable and affirmed the BBB- ratings on the company and its rated debt.

“We project operating underperformance of Auchan Retail will drive ELO's S&P Global Ratings-adjusted leverage (excluding Russia) close to 3.5x in 2023. In the first six months of 2023, ELO reported sales of €15.8 billion, about 1.2% higher than 2022 or about 4.8% higher when excluding fuel. However, reported EBITDA declined to €545 million, about 12% lower than in the first-half 2022, which was already 10% below first-half 2021. The group's reported EBITDA margin was 3.5%, compared with 4% in first-half 2022, and 4.7% in first-half 2021.

“That said, we understand a significant portion of the EBITDA drop was concentrated in Russia and Ukraine, due to the difficult operating environment,” S&P said in a press release.

Given a forecast for challenging operating conditions, the agency said it estimates ELO’s adjusted EBITDA will decrease to about €1.5 billion in 2023, from €1.7 billion in 2022. “This, together with an increase in net debt, will bring S&P Global Ratings-adjusted leverage excluding Russia close to 3.5x, our downgrade trigger.”

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