Moody's lowers Campofrio

Moody's Investors Service said it downgraded the corporate family rating of Campofrio Food Group SA to B1 from Ba3, along with the rating of €500 million senior unsecured notes due 2016.

The probability of default rating also was downgraded to B1-PD from Ba3-PD.

The outlook is stable.

The downgrade follows the underperformance of the company's profitability against expectations as price increases, product mix and cost savings were not sufficient to offset the slowdown in consumer demand and cost pressure, Moody's said.

Sales growth continued in 2012 at 5% year-over-year, but the company's normalized EBITDA declined to €150 million from €169 million in 2011, the agency said.

Campofrio was negatively affected by the two-year climb in pork prices to a 20-year high, driven primarily by grain supply and demand for pork from China in Europe, the agency said.

Moody's also is concerned about the increasingly unpredictable and more recurrent nature of this price trend that led to pressure on the company's profitability both in 2011 and 2012.

The agency also said it is concerned that in the current macroeconomic environment, the ongoing ability to pass through any meat cost increases to customers may be more challenging, particularly given the company's exposure to Southern Europe.

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