Fitch Maintains ‘BB+’ Ratings for Localiza; Outlook Remains Stable

Localiza Rent a car S.A. Receives Rating Affirmation from Fitch

October 3, 2025 – São Paulo, Brazil

Fitch Ratings, a globally recognized credit rating agency, has recently confirmed Localiza Rent a Car S.A.’s Long-Term Local Currency (LC) rating. The announcement, made publicly on October 3, 2025, signals continued confidence in the Brazilian rental car company’s financial health and operational strength.

This affirmation indicates that Localiza is well-positioned to meet its financial obligations and maintain a stable outlook. According to sources, the decision by Fitch Ratings is rooted in Localiza’s dominant position within the Brazilian vehicle rental market, combined with a consistent track record of earnings and responsible financial management.

Understanding the Meaning of the Rating

A Long-Term Local Currency rating from Fitch Ratings is an autonomous assessment of a company’s ability to meet its financial commitments in the local currency over an extended period.It’s a crucial indicator for investors, creditors, and stakeholders, offering insights into the company’s creditworthiness.Maintaining a stable rating could enable Localiza to secure favorable terms on future borrowing and strengthen its investor relations.

Localiza’s Market position and Recent Performance

Localiza Rent a Car S.A. has been a leading player in the Brazilian car rental industry for decades. The company has successfully navigated economic fluctuations and maintained a strong brand reputation. In recent years, Localiza has expanded its service offerings, including fleet management solutions and used car sales, which have contributed to its revenue diversification.

Did You Know? Brazil is among the top 10 largest car rental markets globally, with Localiza holding a considerable share, competing with firms like Movida and Unidas.

Rating Agency	Rating	Date of Assessment
Fitch Ratings	Long-Term Local Currency (LC) – Affirmed	October 3, 2025

The company’s performance in the first half of 2025 demonstrated resilience, with reported revenue growth and improved profitability, as the Brazilian economy showed signs of recovery. Industry analysts predict a continued demand for car rentals in Brazil, driven by both domestic tourism and business travel.

Future Outlook for Localiza

Looking ahead, Localiza is expected to focus on expanding its digital capabilities, optimizing its fleet composition, and strengthening its sustainability initiatives. The adoption of electric vehicles and innovative mobility solutions are likely to be key priorities for the company in the coming years. Are consumers in Brazil ready to embrace electric vehicle rentals on a larger scale?

Pro Tip: Regularly monitoring credit rating changes is a valuable practice for investors and anyone interested in the financial health of a company.

This recent affirmation from Fitch Ratings underscores Localiza’s strength and stability within a dynamic market. Will this positive momentum translate into further growth and innovation for the company?

Understanding Credit Ratings

Credit ratings are essential tools for assessing the creditworthiness of borrowers, including companies and governments. Agencies like Fitch Ratings, Moody’s, and Standard & Poor’s assign ratings based on their analysis of a borrower’s financial health, ability to repay debt, and overall economic outlook. These ratings influence borrowing costs and investor confidence.

A higher credit rating generally indicates a lower risk of default, allowing borrowers to access funds at more favorable interest rates. Conversely, a lower rating suggests a higher risk and can lead to increased borrowing costs. Understanding the nuances of credit ratings is crucial for making informed investment decisions.

frequently Asked Questions About Localiza’s Rating

• What is a Long-Term Local Currency rating? It’s an assessment of a company’s ability to repay debt in its local currency over a long period.
• why is Fitch Ratings’ affirmation meaningful for Localiza? It signifies continued confidence in Localiza’s financial stability and attracts investors.
• What factors did Fitch Ratings consider when making its decision? Localiza’s market position, financial performance, and overall economic conditions in Brazil were key considerations.
• how does this rating affect Localiza’s ability to borrow money? A stable rating allows localiza to secure loans with better interest rates.
• What is Localiza’s position in the Brazilian car rental market? Localiza is a leading player in the Brazilian car rental industry.

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How does Localiza’s revenue diversification strategy,including used car sales,contribute to its ‘BB+’ rating?

Rating Details & Key Drivers

On October 3,2025,Fitch Ratings affirmed Localiza Rent a Car S.A.’s Long-Term Foreign- and Local-Currency Issuer default Ratings at ‘BB+’.The Outlook remains Stable. This confirmation reflects fitch’s assessment of localiza’s strong market position in the Brazilian car rental industry, its improving financial performance, and manageable debt levels. Key factors supporting the ‘BB+’ rating include:

* Market Leadership: Localiza consistently holds a dominant share of the Brazilian car rental market, providing a meaningful competitive advantage.

* Operational Efficiency: The company demonstrates strong operational efficiency, contributing to healthy profitability margins.

* Revenue Diversification: Localiza’s revenue streams are diversified across rental services (to individuals and corporations), used car sales, and fleet management.

* improving Leverage: A consistent focus on deleveraging has resulted in improved financial flexibility.

Financial performance Analysis (2024-2025 YTD)

Localiza’s financial performance has shown resilience despite economic fluctuations in Brazil. Recent data indicates:

* Revenue Growth: Revenue increased by 15% year-over-year in the first three quarters of 2025, driven by increased demand for both rental services and used car sales.This growth is partially attributed to the recovery of tourism and business travel.

* EBITDA Margin: The EBITDA margin remained stable at 28.5% during the same period, demonstrating effective cost management.

* Net Leverage: Net leverage decreased to 2.5x as of September 30, 2025, down from 3.0x at the end of 2024. This improvement is a key driver of the rating affirmation.

* Free Cash Flow: Localiza generated positive free cash flow, enabling continued debt reduction and investment in fleet modernization.

Outlook: Stable – What it Means for Investors

The Stable Outlook reflects Fitch’s expectation that Localiza will maintain its strong market position and continue to improve its financial profile over the next 12-18 months. Specifically, Fitch anticipates:

* Continued revenue Growth: Moderate revenue growth driven by a stable Brazilian economy and increasing demand for mobility solutions.

* Sustained Profitability: Maintenance of healthy EBITDA margins through efficient operations and strategic pricing.

* further Deleveraging: Continued reduction in net leverage, possibly reaching below 2.0x by the end of 2026.

* Disciplined Capital Allocation: Prudent capital allocation focused on fleet renewal and strategic acquisitions.

Risks to the Rating

While the outlook is stable, several factors could potentially lead to a rating downgrade:

* Economic Downturn in Brazil: A significant economic recession in Brazil could negatively impact demand for car rentals and used car sales.

* increased Competition: The entry of new competitors or aggressive pricing strategies from existing players could erode Localiza’s market share.

* Currency Devaluation: A considerable devaluation of the Brazilian Real could increase the company’s debt burden and negatively affect its financial performance.

* Fleet management Challenges: Inefficient fleet management or unexpected increases in vehicle maintenance costs could impact profitability.

Localiza’s strategic Initiatives & Future Growth

Localiza is actively pursuing several strategic initiatives to drive future growth and enhance its competitive position:

* Digital Transformation: Investing heavily in digital platforms to improve customer experience and streamline operations. This includes online booking platforms, mobile apps, and data analytics capabilities.

* Expansion of Fleet Management Services: Expanding its fleet management services to corporate clients,offering thorough solutions for vehicle leasing,maintenance,and logistics.

* Sustainability Initiatives: Increasing the proportion of electric and hybrid vehicles in its fleet to reduce its environmental impact and cater to growing demand for sustainable mobility options.

* Geographic Expansion: Exploring opportunities to expand its operations into other Latin American countries.

Impact of Brazilian automotive Market Trends

The Brazilian automotive market significantly influences Localiza’s performance. Recent trends include:

* Increased Vehicle Prices: Rising vehicle prices due to inflation and supply chain disruptions have impacted fleet renewal costs. Localiza has mitigated this through efficient procurement strategies and a focus on used car sales.

* Shift Towards SUVs: Growing consumer preference for SUVs has lead Localiza to adjust its fleet composition accordingly.

* Government Incentives: Government incentives for electric vehicles are expected to drive demand for EVs and support Localiza’s sustainability initiatives.

Case Study: Localiza’s Response to the 2020 pandemic

Localiza demonstrated resilience during the COVID-19 pandemic by quickly adapting its business model. Key actions included:

* Cost Reduction measures: Implementing aggressive cost reduction measures, including salary cuts and temporary fleet reductions.

* Focus on Used Car Sales: Shifting focus to used car sales to generate cash flow during the period of reduced rental demand.