4th Feb 2020 06:45
(Alliance News) - Moody's Investor's Service late Monday raised its credit outlook for food manufacturer Premier Foods PLC to stable from negative, while affirming its B2 corporate family rating.
The outlook change for the UK company reflects the credit agency's view of a reduced risk of a no-deal scenario for Brexit, even though the risk still exists, since the transition period could expire without any agreement on a future relationship between the UK and EU.
Premier Foods, as a food manufacturer, remains exposed to the uncertainty related to UK consumer spending in the context of an economic slowdown or the event of a no-deal Brexit.
Moody's said that Premier Foods has strengthened its credit metrics over the past two years, as a result of improving its profitability in spite of its large and volatile pension deficit. In addition, the company's current rating is supported by its solid market position with its portfolio of well-established brands.
These include Batchelors ready meals, Homeprice sauces, OXO stock cubes, and Mr Kipling cakes.
However, the rating remains constrained by Premier Foods' high geographical and customer concentration, its exposure to volatility in raw material prices and foreign exchange risk.
"We expect Premier Foods to achieve sales growth in the low single percentage digit in the next 12-18 months and generate positive free cash flow despite ongoing pension contributions, but caution that Ebitda growth will be constrained by its increased consumer marketing spend and
competitive pressures," said Moody's analyst Egor Nikishin.
By Dayo Laniyan; [email protected]
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