(News Bulletin 247) – The title of the distribution group has lost 7% since Tuesday and nearly 50% since the start of the year. A significant portion of investors are betting down on the stock. The company, for its part, ensures that its financial situation is under control.
A stock market price halved since the start of the year, and a fall of almost 7% since Tuesday: the financial situation of the distributor Casino is again of concern to investors, in particular about its ability to meet its debt reduction commitments .
An apparent paradox: the Casino group, led since 2005 by Jean-Charles Naouri, announced good news for him on Tuesday evening, namely the validation of the sale, to the investment company Ardian, of its subsidiary dedicated to the production GreenYellow renewable energy source. But that did not prevent the already historically low share price of the group, which employs more than 200,000 people worldwide, from sagging a little more.
The market’s concern is explained by an announcement unveiled at the same time by Casino, which has concluded with Farallon Capital, an American investment fund, a “pre-financing operation” of part of the sale price of Greenyellow. A sort of bridging loan, up to 350 million euros, and which the group says it received on Tuesday.
“We now know that Casino was on the verge of not respecting its commitments” as to its ability to control its debt, deduces in a note the financial analyst specializing in distribution Clément Genelot, of Bryan, Garnier & Co. And this “against the attempts of the leaders to reassure us in July” on this point.
– “Uncommon” agreement –
According to the analyst, Casino had to turn to this solution, “an unusual financial agreement” in which Farallon “arguably imposed a high interest rate”.
The group is required to have a gross debt that does not exceed 3.5 times its gross operating surplus (a profitability indicator), which allows it to be able to repay its creditors. It approached this threshold at the end of June, and not respecting it would be tantamount for the group to find itself in a situation of default.
Casino ensures that everything is under control: the “financial projections are consistent” with its debt obligations in the coming quarters, “as had been the case for all the previous quarters”, he repeated Thursday to the AFP.
Still, the market price of the distributor has been halved since the beginning of the year, for a capitalization now less than 1.2 billion euros. A plunge far superior to other companies in the sector, and which follows in particular a warning on its profitability for the year 2021, as well as the announcement of the widening of the group’s net debt, which rose in 2021 to 5.9 billion euros compared to 4.6 billion euros at the end of 2020.
On Thursday, 9.6% of Casino’s capital was sold short by players betting on the coming price drop, a high level which, before July, had been unprecedented since 2020, S&P Global Market Intelligence told AFP on Thursday. .
The group has been experiencing financial difficulties for several years. In 2020, the Paris Commercial Court had validated a plan to safeguard Casino’s parent company, Rallye, and the cascade of holding companies (Foncière Euris, Finatis and Euris), heavily indebted, through which Jean-Charles Naouri controls the band.
This plan provided for the reimbursement of creditors via the increase in dividends from Casino, as well as significant asset disposals. The sale of Greenyellow falls within this framework and should bring in, Casino hopes, 600 million euros.
But the Covid-19 epidemic has penalized businesses located in Ile-de-France, Casino’s stronghold via its Franprix and Monoprix brands. And in times of high inflation, as at present, the brands with the best price, or perceived as such by consumers, win over many customers, to the detriment of their less well-positioned competitors.
The brands of the Saint-Etienne distributor, which despite promotional offers on fuel or an assortment of products at so-called “blocked” prices belong overall to this second category, are today ranked 7th distribution group in France by the panelist Kantar .
Casino is behind E.Leclerc, Carrefour, more than 20% market share each, Les Mousquetaires, Système U, Auchan and Lidl.