Fitch Ratings has assigned
Fitch currently rates Ambipar and its subsidiaries',
Ambipar's credit profile reflects its outstanding position in the environmental services industry, with strong growth potential, and the diversification of its revenues in countries that are more economically stable than
The Stable Outlook reflects Ambipar's ability to sustain robust liquidity and gradual indebtedness reduction in the medium term, under lower investments and absence of significant acquisitions, which should bring gross and net leverage to more moderate levels.
Key Rating Drivers
Favorable Business Model: Ambipar's business model includes a set of service provisions in its two main operating segments: environment (mainly waste management and recovery) and response (mitigation of environmental damage from accidents). The environment segment (where the subsidiary Environmental operates) represents around 50% of the revenue and benefits from agreements with an average duration of five years and low contractual exposure to volume risk. The response segment (where the subsidiary Emergencia operates) corresponds to around 50% of the revenue and is supported by contracts lasting around three years, which are renewable.
Approximately 25% of this revenue is recurrent, and the remainder is related to the number of occurrences. The company's current strategy, focused on organic growth, reduces its exposure to acquisition execution risks.
Geographic Diversification: Ambipar's international activities are mainly concentrated in low-risk countries in
Moderate Profitability: The services provided by Ambipar have an EBITDA margin of 25% to 30% in
High Interest Payments: Debt interests should continue to represent high cash commitments in the coming years. The base scenario considers increase in EBITDA to
High Gross Leverage: Fitch expects Ambipar to move its gross debt/EBITDA ratio to more conservative levels. The expectation is that gross leverage will be 5.7x at the end of 2023, with a reduction to less than 4.5x in 2025, as the company expands its EBITDA generation and uses part of its cash to repay debt. Net financial leverage has been moderate, with Fitch's base case scenario considering a reduction to less than 3.0x in 2025.
It also accounted for the equity injection of
Consolidated Approach: The assessment of Ambipar and its two subsidiaries are on consolidated basis due to the high legal ties between them, such as relevant guarantees and cross-default clauses in the group's financial obligations, in accordance with Fitch's 'Parent and Subsidiary Linkage Rating Criteria'. Fitch also considers the strategic and operational incentives to be high for the holding company to support the two subsidiaries, if necessary. Both are relevant for the group's revenue and EBITDA, with broad growth potential and capturing synergies. Emergencia and Environmental are managed in an integrated manner.
Derivation Summary
Ambipar's credit profile is weaker than that of Aegea Saneamento e
Ambipar's rating incorporates the expectation of a gradual increase in its operating cash generation, while Aegea's considers the important challenge of relevant investments and efficiency improvements in important recently incorporated assets. Aegea's financial profile presents high leverage due to the expectation of the company's strong investment cycle and should remain close to Ambipar throughout the rating horizon. Aegea's demonstrated access to the debt market favors its financial flexibility.
Ambipar's credit profile evenly compares to FS Industria de Biocombustiveis Ltda's (FS; BB-/Stable), which operates in the volatile Brazilian ethanol industry. FS and Ambipar's leverage profiles are similar and Fitch incorporates both companies to deleverage in the medium term. FS EBITDA margins at around 30% is above Ambipar's and its low cash cost business model partially mitigates its operations within riskier industry as compared to environmental services.
Key Assumptions
Average EBITDA margins of 27% from 2023 to 2025;
Average annual capex of around
Dividends of 25% of net income.
Absent of acquisitions.
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Longer track record of Ambipar's growth of operations;
Net Debt/EBITDA below 3.0x and Gross Debt/EBITDA below 4.0x, sustainably.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Net Debt/EBITDA above 4.0x and Gross Debt/EBITDA above 5.0x, sustainably;
EBITDA interest coverage ratio below 1.5x, sustainably;
Weakening of liquidity profile with refinancing risks increase;
Deterioration of profitability with EBITDA margins below 22%.
Liquidity and Debt Structure
Strong Liquidity: Fitch expects Ambipar to maintain robust liquidity in the coming years also supported by the recently concluded equity injection. By the end of
Ambipar's total consolidated debt, adjusted for acquisition obligations, was
Issuer Profile
Ambipar provides environmental services in
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.
(C) 2023 Electronic News Publishing, source