International ratings service Standard & Poor’s (S&P) has assigned a preliminary single-‘A’ rating to food giant Campbell Soup Co.’s US$1bn Rule 415 shelf registration.
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S&P affirmed its single-‘A’ long-term and its ‘A-1’ short-term corporate credit ratings for the Camden, N.J.-based company. The outlook is negative. About US$3.6bn of total debt was outstanding at 28 April 2002.
“Campbell will face several challenges in the near term, including its attempt to revitalise brands and continue the integration of recent acquisitions. If the firm is unable to improve credit measures to levels appropriate for the rating over the intermediate term the ratings could be lowered,” said S&P’s credit analyst Ronald Neysmith.
Campbell has cut its dividend rate by about 30% to fund new product developments, improved overall product quality and increased promotional spending.
Campbell is also proceeding with cost-savings initiatives under existing productivity programmes.
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By GlobalDataMoving forward, S&P expects that margins will remain below historical averages as Campbell spends more on advertising and capital expenditures. EBITDA margins for the year ended 28 April 2002, have remained fairly solid at 21% versus 22% for fiscal 2001.
Campbell Soup’s credit measures have declined materially in recent years, reflecting weak operating results and increased share repurchases. Pretax interest coverage for the year ended 28 April 2002 was 4.8x versus 5.5x in 2001.
Credit measures are expected to weaken slightly in the near term in response to the announced initiatives including the acquisition of Snack Foods, which should strengthen its portfolio in Australia.
