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Rating action

Scope Ratings GmbH (Scope) has today affirmed its BB- issuer rating on Nikora JSC (Nikora) and revised the Outlook to Negative from Stable. Scope has also affirmed its BB- rating on senior unsecured debt.

The Outlook revision reflects the increased refinancing risk linked to the GEL 35m bond maturing in November 2025.

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). Nikora’s business risk profile continues to be supported by its strong competitive position, underpinned by a solid market share in Georgia’s FMCG and retail sectors. The company benefits from well-established production entities and high brand recognition in essential consumer goods, particularly meat and dairy products. Nikora’s vertically integrated business model contributes to stable gross margins. However, its relatively small scale at the European level and single-market exposure continue to constrain its rating.

Nikora enjoys strong brand recognition in Georgia, reinforced by numerous awards acknowledging the quality of its products. The company has recently launched a new brand aimed at medium-to-high-income consumers, reflecting its strategic focus on market segmentation. Looking ahead, Nikora intends to further develop its brand portfolio to support entry into third-party markets, enhancing its competitive positioning and growth potential. This has supported a solid Scope-adjusted EBITDA margin* in the consumer goods segment of around 30%, with low historical volatility. However, Nikora’s retail arm faces pressure on its operating profitability following integration of seven direct competitors into the largest retail chain in the country.

Financial risk profile: BB- (unchanged). Scope projects that Nikora will achieve sales growth of around 11%-12% in 2025, broadly in line with its retail segment performance. This growth is expected to be driven by new store openings, overall expansion in the FMCG market, and increased consumer demand supported by recent brand initiatives targeting higher-income segments.

Capital expenditure will be managed prudently, with spending dependent on free operating cash flow, financing availability, and covenant compliance. Investments will prioritise the construction of logistics centres and further brand development aimed at penetrating third-party markets. Despite these strategic investments, Scope expects Nikora to maintain financial discipline and avoid excessive leverage.

Leverage is forecast to rise temporarily, with the debt/EBITDA ratio reaching around 3.5x in 2025 (2024: 2.8x). This is due to the retail arm’s GEL 60m bond issuance and a slight decline in EBITDA. Scope foresees leverage improving to around 3.0x in 2026, as margins recover following the realignment of pricing strategies in the retail segment. Interest coverage is projected to decline to a level close to 4.0x in 2025 (2024: 4.8x) due to increased debt costs. Funds from operations/debt is expected to remain at around 25% (2024: 27%), reflecting continued pressure on operating profitability and elevated debt levels. Free operating cash flow is projected to remain slightly negative, as the positive impact from accelerated inventory turnover in the retail segment will be offset by increased capital expenditure.

Liquidity: inadequate (unchanged). Nikora’s preference for rolling over short-term debt rather than securing committed revolving credit facilities reflects a cost-efficient approach commonly observed in emerging markets. However, this strategy heightens the company’s refinancing risk. Scope projects that the anticipated negative free operating cash flow in 2025, combined with existing cash and cash equivalents and committed unused bank lines, will only cover approximately 15% of the short-term debt maturing that year. In light of the additional refinancing risk posed by the GEL 35m bond maturity due in November 2025, Scope therefore maintains its assessment of the issuer’s liquidity profile as inadequate.

Supplementary rating drivers: The ratings are unaffected by supplementary rating drivers.

Outlook and rating sensitivities

The Negative Outlook reflects Scope's heightened concerns regarding upcoming refinancings, but also the issuer’s maintenance of adequate credit metrics. Scope expects Nikora to execute its substantial capital expenditure programme by prioritising high-impact initiatives, while maintaining a prudent financial approach to preserve credit quality (debt/EBITDA within the 2.5x–3.5x range), and supporting a recovery in operating profitability despite mounting competitive pressures.

The upside scenario for the ratings and Outlook is:

1. Decreased concerns around upcoming refinancings

The downside scenarios for the ratings and Outlook are (individually):

1. Increased concerns around upcoming refinancings
    
2. Debt/EBITDA above 3.5x on a sustained basis

Debt ratings

Scope has also affirmed the senior unsecured debt rating at BB-. The recovery analysis is based on a hypothetical default scenario in 2025, which results in an above-average recovery rate. However, given the unsecured nature of the bonds and the risks associated with emerging markets, Scope has not notched up the senior unsecured debt rating above that of the issuer.

Environmental, social and governance (ESG) factors

ESG factors have no impact on this credit rating action.

All rating actions and rated entities

JSC Nikora

Issuer rating: BB-/Negative, Outlook change

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 Outlook, (General Corporate Rating Methodology, 14 February 2025; Retail and Wholesale Rating Methodology, 25 June 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
The Rated Entity and/or its Related Third Parties participated in the Credit Rating process.
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 Outlook and the principal grounds on which the Credit Ratings and Outlook are based. Following that review, the Credit Ratings and Outlook were not amended before being issued.

Regulatory disclosures
These Credit Ratings and Outlook are issued by Scope Ratings GmbH, Lennéstraße 5, D-10785 Berlin, Tel +49 30 27891-0. The Credit Ratings and Outlook are UK-endorsed
Lead analyst: Dániel Szebényi, Director
Person responsible for approval of the Credit Ratings: Philipp Wass, Managing Director
The Credit Ratings/Outlook were first released by Scope Ratings on 15 August 2019. The Credit Ratings/Outlook were last updated on 29 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
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