Fitch Affirms Amaggi's Ratings at 'BB'; Outlook Stable

Published: 2025-06-10 04:54:11 ET ADM

Published on 06/10/2025 at 04:54

Fitch Ratings has affirmed Andre Maggi Participacoes S.A.'s (Amaggi) Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs) at 'BB' and National Long-Term rating at 'AA+(bra)'.

Fitch has also affirmed Amaggi Luxembourg International S.a r.l.'s senior debt at 'BB'. The Rating Outlook is Stable.

Amaggi's ratings reflect its strong position in Brazilian agribusiness. They also incorporate the sector's inherent risks: volatile grains prices, exchange rate fluctuations, farmer defaults, climate events, and low trading margins. Margin volatility is partially mitigated by Amaggi's conservative risk management, large scale and business integration.

The Stable Outlook incorporates the company's manageable liquidity and an expected reduction of readily marketable inventories (RMI) net leverage to 3.5x or lower starting in 2025. A temporary increase to about 5.7x in fiscal 2024 was due to increased investments in logistics and lower EBITDA generation from the Mato Grosso crop failure in 2024.

Key Rating Drivers

Soybean Recovery in Mato Grosso: After a challenging 2024, Fitch forecasts a strong recovery in soybean production in Mato Grosso of around 26.4% in 2025. This recovery should provide healthier competition for origination by improving margin spreads and diluting logistics expenses for traders, as well as improving margins for farmers in the region.

Stable Prices Despite Trade Tensions: Fitch expects relatively stable prices for soybeans and corn in the international market in 2025 and in 2026, despite trade tensions. Fitch assumes the price of soybeans at USD 10.20 per bushel in 2025 and USD 10.30 per bushel in 2026, and the price of corn at USD 4.60 per bushel in 2025 and in 2026. These prices should not pressure working capital needs of trading companies.

Competitive Structure in Mato Grosso: Amaggi's capacity to process large volumes thanks to its logistics, enables the group to compete with large multinational grain companies such as Archer Daniels Midland Company (ADM), Cargill Incorporated (Cargill), Bunge Global S.A. (Bunge) in the acquisition of grains in Mato Grosso State, which is the largest producing region for soy and corn in Brazil.

Counterparty Risks: Advances in financing to farmers are provided under strict criteria with the use of CPRs (rural credit notes) for collateral. No single producer represents more than 1.4% of Amaggi's annual origination. As a large agricultural producer with farmlands in different locations, the company follows the development of the crop over different locations in the state.

Recovery of Margins in 2025: Fitch forecasts that EBITDA margins should recover to around 5.4% in 2025 from 3.6% in 2024. The crop failure in Mato Grosso in 2024 impacted the group's overall performance, but the strong performance of the 2025 crop season will be important for margin recovery. Fitch projects cash flow from operations (CFO) of USD256 million in 2025 and USD307 million in 2026.

Net Leverage Below 3.5x in 2025: Fitch projects that Amaggi's RMI net-adjusted leverage should strengthen to 3.5x in 2025 and below. Leverage increased to about 5.7x in 2024 due to lower profitability in the trading and farming divisions due to the crop failure in Mato Grosso. For credit purposes, Fitch considers RMI-adjusted leverage when evaluating commodity processing and trading companies.

Peer Analysis

Fitch views Amaggi's business risk profile as weak relative to its peers, Bunge (BBB+/Stable), Cargill (A/Stable), and ADM (A/Negative). Amaggi has a smaller operational scale, lower diversification, and substantial concentration in one region.

Although Amaggi's consolidated profitability is satisfactory, it remains exposed to the strong competition within the industry, with the presence of important international groups operating with strong credit profiles.

Key Assumptions

Soybeans prices of USD10.20 per bushel in 2025 and USD10.30 per bushel in 2026;

Corn prices of USD4.60 per bushel in 2025 and in 2026;

Cotton prices of USD66 cents per pound in 2025 and USD70 cents per pound in 2026;

Total investments of USD251 million in 2025 and USD295 million in 2026.

RATING SENSITIVITIES

Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

Loss of business diversification;

RMI-adjusted net leverage (RMI adjusted total net debt to operating EBITDA) sustained above 3.5x range on a sustainable basis;

Liquidity ratio (cash and marketable securities+RMI+account receivables/Total short liabilities) below 0.8x at year-end;

RMI-Adjusted EBITDA/Interest Paid below 2.75x;

Secured debt/Ebitda above 2.5x;

A multi-notch downgrade of Brazil's Country Ceiling and inability to cover hard currency interest expenses by offshore cash and exports

Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

Improved scale and geographical diversification;

RMI-adjusted net leverage (RMI adjusted total net debt to operating EBITDA) below 2.5x range on a sustained basis;

Liquidity ratio (cash and marketable securities+RMI+account receivables/Total short-term liability) above 1x on a sustainable basis;

Secured debt/EBITDA below 1x.

Liquidity and Debt Structure

Amaggi has adequate financial flexibility. The company has access to diversified sources of external liquidity for short-term working capital along with cash, short-term marketable securities, and high levels of liquid RMI.

As of March 31, 2025, Amaggi reported consolidated cash and marketable securities of USD980 million, and USD987 million of short-term debt. The company also has access to several uncommitted bank lines and maintains a minimum cash policy of USD400million.The company's liquidity ratio based on cash, receivables, RMI and derivatives over total current liabilities was 1.3x as of March 31, 2025.

Issuer Profile

Amaggi is Brazil's fourth largest soft commodity trader, trading around 14.4 million tons of grains annually. It is the third largest agricultural producer with 359,000 hectares of farmland. Amaggi operates across the agribusiness chain, including farming, trading, processing and logistics.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS

Click here to access Fitch's latest quarterly Global Corporates Macro and Sector Forecasts data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.

ESG Considerations

Andre Maggi Participacoes S.A. has an ESG Relevance Score of '4' for Waste & Hazardous Materials Management; Ecological Impacts due to the ecological impact of its land use. A large amount of the grain in its commodity business comes from the Amazon and Cerrado Biomes. This has a negative impact on the company's credit profile and is relevant to the ratings in conjunction with other factors.

Andre Maggi Participacoes S.A. has an ESG Relevance Score of '4' for Group Structure due to lack of board independence as the company is privately controlled, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors.

Andre Maggi Participacoes S.A. has an ESG Relevance Score of '4' for Governance Structure due to the existence of related parties transaction, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors.

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.

RATING ACTIONS

Entity / Debt

Rating

Prior

Amaggi Luxembourg International S.a r.l.

senior unsecured

Affirmed

Andre Maggi Participacoes S.A.

LT IDR

Affirmed

LC LT IDR

Affirmed

Natl LT

AA+(bra)

Affirmed

AA+(bra)

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VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com

PARTICIPATION STATUS

The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer's available public disclosure.