S&P Global Ratings on Feb. 23 revised Brazil-based food producer BRF SA's global scale rating outlook to negative from stable, citing its inability to improve its operating performance in the second half of 2017.
The negative outlook reflects a potential downgrade in the next 6 to 12 months if BRF is unable to recover profitability and generate free operating cash flow to reduce debt.
The agency said the company has faced "unfavorable events" since mid-2016 — including high grain prices in Brazil, weak economic conditions and a volatile external market — which resulted in a BBB- downgrade from BBB in August 2017. It also highlighted inefficiencies in BRF's managing processes that led to senior management changes.
S&P affirmed the company's BBB- global scale and brAAA national scale corporate credit and issue-level ratings, with a stable national scale rating outlook. The BBB- rating reflects the company's plan to recover EBITDA and its commitment to a conservative financial policy.
S&P said it could revise BRF's global scale rating outlook to stable in the next 12 to 18 months if it reports stronger EBITDA and cash flow generation, as well as stable profitability.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.