Qivalio has upgraded its short-term rating for the NEU CP instrument of L’Occitane International

2021-10-12

Lyon, October 12, 2021 – Credit rating agency Qivalio has upgraded its short-term rating for the €300m NEU CP program of L’Occitane International (which could be increased to €500m), to SR1 (from SR2).

Rating rationale

Qivalio has analysed the credit profile of L’Occitane International as well as the potential impacts expected from the ending of the Chapter 11 procedure in the US in order to review its short-term rating. The outcome is an upgrade of our short-term rating to SR1.

Credit profile

L’Occitane is an international manufacturer and retailer of body, face, fragrance and home products using natural and organic ingredients. The company mainly sells skincare products through 6 different brands, the primary one being L’Occitane en Provence. The company has been listed on the Hong Kong Stock Exchange since 2010 and is majority-owned by Reinold Geiger, its chairman and former CEO.

In January 2021, L’Occitane Inc, the US subsidiary for retail sales, voluntarily filed for Chapter 11 in an attempt to renegotiate its lease terms, which triggered a deconsolidation of l’Occitane inc for February and March 2021. With the procedure set to close in the weeks ahead, l’Occitane Inc is expected to be reconsolidated. From a credit standpoint, the situation post-Chapter 11 is expected to be favourable for l’Occitane as lease liabilities will be lower whereas EBITDA is expected to be higher, thereby improving the Qivalio-adjusted net leverage ratio. The rest of the group remained resilient through the pandemic as L’Occitane reported consolidated revenues down only 6.5% for its FY21 (-5.7% including l’Occitane Inc sales for February and March 2021), and reported revenues up 23% for 1Q22 (to end-June 2021). Since our last rating report update in March 2021, the group’s liquidity profile has improved significantly with the renewal of its RCF with a 5 + 1+ 1 years maturity.

However, our rating remains constrained by the limited size of the company compared to bigger peers, and its dependence upon the success of its main brand L’Occitane en Provence, which still accounts for 78% of consolidated revenues, even though diversification has improved with the acquisition of Elemis in 2019 (c.10% of FY21 sales).

Liquidity profile

The liquidity profile of the company has significantly improved since our last report in March 2021, as expected, since the group signed a new RCF in late March 2021 with a 5 +1 +1 years maturity.

Credit outlook

We have a Stable outlook for the next 12 months, which reflects our view that credit metrics will slightly improve - but not to a significant degree - as the pandemic fades away and stores open again in most countries, while the level of online sales is expected to be sustained as well.

Our methodologies used for this rating are available at:

L’Occitane International

Founded in 1997 by Reinold Geiger, after the acquisition of the L’Occitane en Provence brand, L’Occitane Group is an international group that manufactures and retails beauty and well-being products that are rich in natural and organic ingredients. The company mainly sells skincare products, with perfume, haircare and other products completing the mix. L’Occitane Group sells its products through 6 different brands (L’Occitane en Provence, L’Occitane au Brésil, Melvita, Erborian, LimeLife and Elemis), to address different markets, but all have in common the use of natural/organic ingredients. Due to its history, the majority of the group’s sales are concentrated towards the L’Occitane en Provence brand. L’Occitane International is present in 90 countries through a network of some 3,088 stores, of which 1,523 are directly operated by the company; the remaining stores are operated by distributors.

Qivalio

Qivalio is an innovative European rating, research and advisory group serving sustainable finance and sustainable development. The Group provides investors, companies and organizations with solutions to the challenges of financing as well as environmental and societal transformation. Created in 2017, Qivalio is the result of the merger between Spread Research and EthiFinance, French financial and extra-financial rating agencies both founded in 2004. Qivalio provides its services to a wide range of leading international clients under the brands Spread Research (independent credit research), Qivalio Ratings (credit rating agency), Qivalio Analytics (Risk Modelling), and EthiFinance (extra-financial rating and advisory agency).

Qivalio operates as a credit rating agency registered with and regulated by the European Securities and Markets Authority (ESMA) since July 2013, and as an External Credit Assessment Institution (ECAI). Our ratings are recognized by the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA), and can be used for the internal calculation and models of banks and insurance companies. Under the Qivalio Ratings brand (formerly Spread Ratings), Qivalio provides financial analysis, assigns credit ratings for issuers, and provides credit opinions for financial operations (particularly for private debt funding operations or for the purpose of accounting/tax documentation). Qivalio is one of the rating agencies authorized by the Banque de France to rate NEU CP and NEU MTN programs.

Contacts

Qivalio
Elie Hériard-Dubreuil / elie.heriard-dubreuil@qivalio.com

L’Occitane International
Samuel Antunes / L’Occitane International - samuel.antunes@loccitane.com

LOccitane-Upgrading our short-term rating to SR1 press release VDEF.pdf


Auteur

Thomas Dilasser

Analyste

thomas.dilasser@qivalio.com