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November 30, 2007 |
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DIVINO SA: Moody's Reviews Ba3 & Caa1 Ratings for Likely Upgrade Moody's Latin America has removed its negative outlook for Divino S.A.'s Ba3.uy national scale rating and its Caa1 global local currency rating and placed both ratings under review for possible upgrade. The decision is based on the fact that, despite a competitive environment, Divino has been able to improve its financial performance during the last fiscal year ended June 30, 2007. Specifically, revenue growth was solid due to favourable market dynamics, free cash flow was positive, liquidity improved and market share remained stable. Although margins deteriorated slightly due to higher costs and expenses, overall profitability remained adequate for the company's rating category. The ratings continue to reflect the company's small size, geographic concentration, historically weak free cash flow generation due to elevated working capital needs and tight liquidity. However the ratings also incorporate Divino's leading market share position in Uruguay, long track record in the business and low overall leverage for its rating category. The review process will focus primarily on the likelihood that the company will maintain its market share and margins as its competitive environment evolves and is potentially impacted by increased imports or new competitors. The review will also focus on the outlook for the housing and retail sectors in Uruguay. Founded in 1935, Divino SA is a small Uruguayan family-owned company, which manufactures, sells and exports spring and rubber-foam mattresses and polyurethane products through its own retail chain and through wholesalers. Total sales for the fiscal year ended June 30, 2007 reached approximately US$23 million. |
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