OREANDA-NEWS. S&P Global Ratings revised the outlook on Jalles Machado S. A. to positive from stable. We also affirmed our 'BB-' global scale and 'brA' national scale corporate credit ratings on the company.

The outlook revision reflects a possible upgrade in the next 12-18 months, stemming from improved liquidity profile due to robust FFO generation, manageable capex level in the 2018 harvest, and proven track record of lower leverage ratios even amid downward cycles in global sugar prices, unfavorable weather conditions, or volatility of the Brazilian real. Jalles has posted stronger EBITDA and positive free operating cash flow (FOCF) which reduced its debt in the past two harvests thanks to the significant rebound in sugar and ethanol prices since the middle of 2015. The company has consistently posted above-average profitability with high productivity at its fields, enabling Jalles to operate close to full capacity and dilute fixed costs. An offsetting factor is its still lower scale than those of its industry peers and other Brazilian companies in the same rating category, which combined with the lack of track record on sustaining lower leverage and its still less than adequate liquidity. These factors have led us to assign a negative comparable rating analysis.