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Rating action

Scope Ratings GmbH (Scope) has today affirmed the BB/Stable issuer ratings on Bonafarm Zrt. (Bonafarm) and its fully owned subsidiary Pick Szeged Zrt. (Pick Szeged). Concurrently, the BB senior unsecured debt ratings have also been affirmed.

The full list of rating actions and rated entities is at the end of this rating action release.

Key rating drivers

Business risk profile: BB+ (unchanged). Bonafarm’s moderate business risk profile continues to benefit from its good diversification and moderate market positioning, brand strength and operating profitability. Bonafarm is the largest agricultural and fresh food producer in Hungary. It achieved consolidated revenues of HUF 382bn in 2024, establishing its continued market leadership. The group is vertically integrated and active in several areas within the agriculture and food processing sectors, offering a wide range of products, which benefits its diversification. Bonafarm is also present in multiple retail chains, primarily in Hungary, and is thus well-diversified with regard to its customers and suppliers. However, geographical concentration is a key rating constraint. Over 75% of revenues are generated in Hungary, making the business highly dependent on local market conditions. Bonafarm’s brand strength is supported by its regionally well-known, high-quality Pick and Sole-Mizo brands.

The group’s Scope-adjusted EBITDA margin* typically falls within the 5% to 10% range. Scope considers this moderate compared to that of large European branded consumer peers. Following Bonafarm’s exceptional operating profitability in 2022, lower volumes sold in 2023 due to heightened inflation in Hungary led to a margin compression of 8.5% (down from 12.4% in 2022). In 2024, the EBITDA margin fell further to 5.2%. This was primarily driven by the significantly lower performance of the consumer products segment amid the collapse of duck commodity prices (which impacted all European market players) and, to a lesser extent, the avian flu, which halted chicken operations at several locations (following the consolidation of Hungerit in 2024).

Scope does not expect a significant operational recovery before 2026, mainly due to several animal diseases negatively impacting Bonafarm’s consumer goods segment, but also because of adverse weather conditions putting pressure on the agribusiness segment. While each animal sector (dairy cows, pigs and poultry) has been exposed to diseases to some extent, causing a loss of business, Bonafarm expects operations to return to normal in H2 2025. Nevertheless, an EBITDA margin of 5.1% is forecasted for 2025. Based on expectations of a recovery in commodity prices and the continued management of animal diseases and operations, Scope projects that profitability will increase to above 6.5% in the medium term.

Financial risk profile: BB- (unchanged). Scope forecasts that Bonafarm’s credit metrics will deteriorate due to the continued distressed operating profitability expected for 2025, coupled with its capital-intensive investment programme. Bonafarm’s investment plans include two major projects: a new moulded salami brownfield factory for Pick Szeged and a poultry slaughterhouse greenfield project for Hungerit. Scope anticipates total net capex of HUF 173.5bn between 2025 and 2027, thereby proving heightened pressure on free operating cash flow (FOCF). Consequently, the group’s cash flow cover, as measured by FOCF/debt, remains the main rating constraint, as Scope expects significantly negative FOCF values over the next two years.

Additional loans have been taken out to fund the group’s capex plans. This has resulted in a deterioration in leverage and interest cover, as interest rates remained high in Hungary. Bonafarm contracted additional debt to finance its capex plans, increasing its gross debt from HUF 58bn at YE 2024 to HUF 79bn by H1 2025. It also had unused credit facilities totalling HUF 65bn, which will be utilised for its investment programme in the upcoming years. Scope forecasts that leverage will increase towards 4.0x in 2025 from 2.3x in 2023 before gradually recovering to below 3.0x in the medium term. Similarly, funds from operations/debt are expected to fall to a moderate level of below 25% in 2025 before gradually returning to above 30% over the medium term. The new debt has also negatively impacted the group’s historically very strong interest cover, as the average cost of debt will increase significantly and interest income is expected to dissipate, leading to an EBITDA interest cover of 7.0-8.0x. Nevertheless, this remains the main factor supporting the group’s financial risk profile.

In January 2025, BONITÁS 2002 (ultimate shareholder of Bonafarm) contributed MCS Slaughterhouse to Bonafarm and thus the group will include its financial figures in its consolidated report starting in 2025.

In July 2025, Bonafarm reached an agreement with FrieslandCampina to acquire the majority stake of its Romanian subsidiary by YE 2025. Scope’s forecasts do not include any further acquisitions or dividend payments between 2025 and 2027.

Liquidity: adequate (unchanged). Scope considers liquidity to be adequate despite forecasted internal and external liquidity ratios of below 100% for the next two years due to the capital-intensive investment programme. This is because the investments are expected to be fully pre-financed. Furthermore, Scope assumes that the group has the flexibility to postpone smaller capex when needed. Scope still expects further shareholder support to cover the negative FOCF. Sources of liquidity are HUF 27bn of available cash and equivalents as at YE 2024 (thereof HUF 12.5bn was invested in Austrian treasury bills, however this is assumed to be liquidated in order to finance the investment programme), and HUF 65bn of undrawn credit lines as at June 2025.

Scope notes that Pick Szeged’s senior unsecured bond issued under the Bond Funding for Growth Scheme has a covenant requiring the accelerated repayment of the outstanding nominal debt amount (HUF 27bn) if the debt rating of the bond stays below B+ for more than two years (grace period) or drops below B- (immediate repayment). Such a development could adversely affect the liquidity profile of both Bonafarm and Pick Szeged. The rating headroom to entering the grace period is three notches. Scope therefore sees no significant risk of the rating-related covenant being triggered.

Supplementary rating drivers: +1 notch (unchanged). Scope maintains the one-notch rating adjustment for parent support from the standalone credit assessment of BB-, demonstrated by recurring capital injections in the past, and the expectation of further capital increases (and/or a subordinated owner’s loan with the intention to convert it into equity), which Scope assumes will be over 15% of the resources required for the ongoing large investment projects. Moreover, Scope expects a continuation of the zero-dividend policy.

Outlook and rating sensitivities

The Stable Outlook reflects credit metrics that are consistent with the current rating, despite an increase in leverage (exemplified by a temporary deterioration in debt/EBITDA towards 4.0x), due to the group’s capital-intensive investment programme and depressed profitability.

The upside scenario for the ratings and Outlook is:

• Remote in light of the upward leverage trajectory, but may be considered if FOCF becomes breakeven on a sustained basis

The downside scenario for the ratings and Outlook is:

• Debt/EBITDA deteriorating to above 4.0x on a sustained basis

Debt rating

Scope has affirmed the BB senior unsecured debt ratings of Bonafarm and Pick Szeged in line with their issuer ratings.

Scope’s recovery analysis is based on a hypothetical default scenario in 2026 and assumes outstanding senior secured debt of HUF 80bn. The analysis assumes a liquidation scenario given the significant asset balance, including fixed assets with moderate recoverable values, as Scope has applied a significant discount to recovery rates for the aging processed meat product plants. This scenario indicates an ‘excellent’ recovery for holders of senior unsecured debt. Nevertheless, Scope has remained conservative due to Bonafarm’s capital-intensive capex programme, which may require additional external financing in case of cost overruns.

In December 2019, Pick Szeged issued a HUF 27bn senior unsecured bond unconditionally and irrevocably guaranteed by the parent company, Bonafarm (ISIN: HU0000359336), through the Hungarian Central Bank’s Bond Funding for Growth Scheme. The bond proceeds were earmarked for investment capex and the general financing of operations. The bond has a tenor of 10 years and a fixed coupon rate of 2.0%. The bond has a bullet repayment schedule with 100% of the face value payable at maturity. In addition to the rating deterioration covenant, the bond covenants include non-payment, insolvency proceedings, cross-default (with the senior secured club facilities agreement, which has a net debt/EBITDA financial covenant of 4.0x), and change of control (initially limited to Dr. Sándor Csányi as final beneficial owner; in 2023 bondholders agreed to a change of control to a Csányi family trust) covenants. The only bond issuance within Bonafarm Group was made at the Pick Szeged level. Bonafarm Group has other senior unsecured debt ranking pari passu in the form of payables.

Environmental, social and governance (ESG) factors

Overall, ESG factors have no impact on this credit rating action.

All rating actions and rated entities

Bonafarm Zrt.

Issuer rating: BB/Stable, affirmation

Senior unsecured debt rating: BB, affirmation

Pick Szeged Zrt.

Issuer rating: BB/Stable, affirmation

Senior unsecured debt rating: BB, affirmation

*All credit metrics refer to Scope-adjusted figures.

Stress testing & cash flow analysis
No stress testing was performed. Scope Ratings performed its standard cash flow forecasting for the company.

Methodology
The methodologies used for these Credit Ratings and/or Outlook, (General Corporate Rating Methodology, 14 February 2025; Consumer Products Rating Methodology, 31 October 2024), are available on scoperatings.com/governance-and-policies/rating-governance/methodologies.
Information on the meaning of each Credit Rating category, including definitions of default, recoveries, Outlooks and Under Review, can be viewed in ‘Rating Definitions – Credit Ratings, Ancillary and Other Services’, published on scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Historical default rates of the entities rated by Scope Ratings can be viewed in the Credit Rating performance report at scoperatings.com/governance-and-policies/regulatory/eu-regulation. Also refer to the central platform (CEREP) of the European Securities and Markets Authority (ESMA):registers.esma.europa.eu/cerep-publication/. A comprehensive clarification of Scope Ratings’ definitions of default and Credit Rating notations can be found at scoperatings.com/governance-and-policies/rating-governance/definitions-and-scales. Guidance and information on how environmental, social or governance factors (ESG factors) are incorporated into the Credit Rating can be found in the respective sections of the methodologies or guidance documents provided on scoperatings.com/governance-and-policies/rating-governance/methodologies.
The Outlook indicates the most likely direction of the Credit Ratings if the Credit Ratings were to change within the next 12 to 18 months.

Solicitation, key sources and quality of information
Bonafarm Zrt.: The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
Pick Szeged Zrt.: The Credit Ratings were not requested by the Rated Entity or its Related Third Parties. The Credit Rating process was conducted:
With the Rated Entity or Related Third Party participation    YES
With access to internal documents                                        YES
With access to management                                                   YES
The following substantially material sources of information were used to prepare the Credit Ratings: public domain, the Rated Entity and Scope Ratings' internal sources.
Scope Ratings considers the quality of information available to Scope Ratings on the Rated Entity or instrument to be satisfactory. The information and data supporting these Credit Ratings originate from sources Scope Ratings considers to be reliable and accurate. Scope Ratings does not, however, independently verify the reliability and accuracy of the information and data.
Prior to the issuance of the Credit Rating action, the Rated Entity was given the opportunity to review the Credit Ratings and/or Outlook and the principal grounds on which the Credit Ratings and/or Outlook are based. Following that review, the Credit Ratings and/or Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and/or Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and/or Outlook are UK-endorsed.
Lead analyst: Vivianne Anna Kápolnai, Associate Director
Person responsible for approval of the Credit Ratings: Sebastian Zank, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 6 September 2019. The Credit Ratings/Outlook were last updated on 15 August 2024.

Potential conflicts
See scoperatings.com under Governance & Policies/Regulatory for a list of potential conflicts of interest disclosures related to the issuance of Credit Ratings, as well as a list of Ancillary Services and certain non-Credit Rating Agency services provided to Rated Entities and/or Related Third Parties.

Conditions of use/exclusion of liability
© 2025 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings GmbH, Scope Ratings UK Limited, Scope Fund Analysis GmbH, Scope Innovation Lab GmbH and Scope ESG Analysis GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope’s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope does not, however, independently verify the reliability and accuracy of the information and data. Scope’s ratings, rating reports, rating opinions, or related research and credit opinions are provided ‘as is’ without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or other damages, expenses of any kind, or losses arising from any use of Scope’s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party as, opinions on relative credit risk and not a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope’s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings GmbH at Lennéstraße 5 D-10785 Berlin. Public Ratings are generally accessible to the public. Subscription Ratings and Private Ratings are confidential and may not be shared with any unauthorised third party.