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November 29, 2016

CSM Bakery Solutions dismisses Moody’s downgrades

CSM Bakery Solutions has brushed off downgrades from credit agency Moody's, with the US bakery group insisting it is looking forward to a "successful" 2017.

By Dean Best

CSM Bakery Solutions has brushed off a downgrade from credit agency Moody’s, with the US bakery group insisting it is looking forward to a “successful” 2017.

Moody’s last week reduced its ratings on the company, pointing to a “further deterioration in CSM’s operating performance”. The company argued Moody’s new ratings were based on “dated information” 

The agency said “a problem-plagued SAP implementation” at CSM’s North America business had “negatively impacted” the company’s third-quarter results, with sales fall, “significantly higher” operating costs and “strained relationships with customers, suppliers and employees”.

The corporate family rating on CSM was downgraded from B2 to Caa1 and the probability of default rating from B2-PD to Caa1-PD. Moody’s first-lien term loan rating was reduced from B1 to B3 and its second lien-term loan rating from B3 to Caa2.

As Moody’s downgraded its ratings on CSM, it said it now expects the company’s debt/EBITDA will rise to over nine times by the end of 2016 compared to 5.4 times at the beginning of the year. The agency insisted its “visibility on the company’s future performance is not clear” and cast questions on what it said was CSM’s assertion the company’s operating challenges have “bottomed out”.

Brian Weddington, vice president and senior credit officer at Moody’s, said: “IT integration challenges are not uncommon in the packaged goods industry and are generally resolvable over time. However, CSM’s SAP implementation has been especially troubled due to poor execution that exacerbated customer service problems. Because of the extended period of disruptions in North America and the wide range of CSM stakeholders that have been negatively impacted, financial and business risks are likely to remain very high over the next year.”

However, in a statement to just-food yesterday, a spokesperson for CSM said: “The Moody’s downgrade is based on dated information and does not reflect what’s currently taking place at CSM. We’re confident we have addressed our recent challenges and take great pride in bringing our strong portfolio of products backed by some of the most talented people in the industry to help our customers succeed . We’re looking forward to a strong close to 2016 and a successful 2017.”

The spokesperson declined to provide details on what CSM’s financial results were in the first nine months of the year.

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