Fitch ratings has affirmed Campbell's A- F2 rating and revised the soup maker's outlook from stable to positive.

This rating action affects approximately US$2.9bn of debt as of 30 April, 2006.

The revision to Campbell's outlook reflects better than anticipated results in Campbell's credit measures, stabilisation of profitability and solid cash flow generation, Fitch said.

The ratings also reflected analysts' expectations that improvements in operating fundamentals and a balanced financial strategy will strengthen Campbell's credit profile in the near term. Fitch said that while there may be a temporary increase in debt balances at the end of FY2006, the ratings agency predicted lower debt in 2007 due to repayment of some or all of $600m of unsecured notes.

For the FY ended 30 April Campbell's total debt-to-operating EBITDA was 1.9 times, cash flow from operating activities-to-total debt was 41% and operating EBITDA-to-gross interest expense was 8.3 times. "These credit metrics are the best Campbell's has delivered since announcing its transformation plan in 2001 and reflect a financial strategy that focused on debt reduction and investing in its business," Fitch said.

EBITDA margin for the last financial year was 19.9% and its cash flow from operations before capital spending and dividends was $1.2bn.

"The combination of a strong financial profile, its leading competitive position in the high margin soup category, the strength of its brands and expectations that fundamentals will remain strong place positive bias on Campbell's ratings," the ratings agency continued.

Profitability, Fitch maintained, is benefiting from a shift towards higher margin premium, condensed and microwaveable soups. Although increasing energy and packaging costs are taking their toll Campbell's market-leading position has allowed it to off-set these pressures through pricing and productivity savings. This, Fitch said, "will continue to provide stability and even moderate improvement in Campbell's margins."

According to Fitch, Campbell's credit profile is strengthened by liquidity form recent divestures - including the sale of its UK and Irish businesses. "Due to the fragmented nature of the businesses, Fitch views the divestiture modestly positively. While Campbell's has not stated its intended use of cash proceeds, Fitch anticipates a higher level of dividends and share repurchases that would not weaken the company's credit profile," Fitch said.