DEL MONTE Pacific Ltd.’s (DMPL) US unit Del Monte Foods, Inc. received a “B” credit rating from S&P Global Rating for its “continued deleveraging,” parent DMPL shared the document with the exchange on Wednesday.
The company’s “B” credit rating is an improvement over its previous “B-” rating, while its issue-level rating on its debt also went up to “B” from “B-.” The ratings came with a “stable outlook.”
“The upgrade reflects continued deleveraging, driven by revenue growth, productivity improvements, and lower debt balances,” S&P Global Ratings said in its report.
The company reported an 11% growth in sales for its first quarter ending August, on the back of high demand for its branded packaged fruits, vegetables, and beverages that was “partially offset by the company’s planned exit of lower-margin private label business.”
S&P Global Ratings said its new products such as riced vegetables, pocket pies, bone broths, and bubble tea will help the company diversify its product offerings as well as counteract category declines when consumers begin dining out again.
Its pricing actions, such as price increases and reduction of overhead spending, is expected to offset the anticipated inflation for the year.
“The stable outlook reflects our forecast for strong revenue growth and our expectation that the company will be able to offset inflation headwinds with productivity and pricing actions such that leverage will be in the low-3x area in fiscals 2022 and 2023,” S&P Global Ratings said.
“We also expect at least break-even free cash flow generation in 2022 and above $50 million in 2023,” it added.
S&P Global Ratings noted the influence of Del Monte Pacific, adding that the parent firm “will likely provide” assistance to Del Monte Foods if needed through additional liquidity, capital, or risk transfer.
“Del Monte Foods represents more than half of the group’s EBITDA (earnings before interest, taxes, depreciation, and amortization). The group credit profile has continued to improve due to Del Monte Foods’ better profitability and cash flow, as well as sustained growth in Asian operations,” it said.
Shares of parent Del Monte Pacific at the stock exchange improved by 1.40% or 20 centavos on Wednesday, closing at P14.48 each. — Keren Concepcion G. Valmonte
