S&P: General Mills outlook cut to negative

Standard & Poor's revised its outlook on General Mills Inc. to negative from stable and affirmed its ratings on General Mills, including its BBB+ long-term and A-2 short-term corporate credit ratings, its A-2 commercial paper rating and its BBB+ senior unsecured rating.

S&P said the outlook revision reflects its concern that General Mills' credit measures remain weak for the rating category and that the company's ability to achieve appropriate credit metrics for the rating in the near term will be constrained by lower sales and earnings growth and increasing commodity costs over the next couple of quarters.

Furthermore, General Mills is in discussion with Diageo plc to assist the company in disposing of its ownership interest and it is S&P's expectation that the outcome of the final structure will not significantly impact General Mills' debt leverage.

Pretax interest coverage for fiscal year ended May 30 was 4.1x, while funds from operations to total debt was 12.8% for the same time period. S&P does not expect any significant leverage improvement in the short term as General Mills focuses on brand building and new-product introductions.

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