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Fitch: Smithfield outlook positive
Fitch Ratings said it revised the outlook for Smithfield Foods, Inc. to positive from stable and affirmed its long-term issuer default rating at B-, its senior unsecured debt at CCC/RR5 and its asset-based revolving credit facility, secured term loan and secured notes at BB-/RR1.
The agency said the positive outlook is due to the fact that operating fundamentals and credit metrics have improved considerably over the past three quarters. Furthermore, in fiscal 2011, Fitch expects additional improvement in year-over-year earnings growth and meaningful debt reduction.
Smithfield's ratings reflect its high financial leverage, low relative margins, volatile cash flow generation and lack of diversity across proteins, Fitch said.
These negatives are partially offset by Smithfield's leading position in the pork industry, good liquidity and the fact that near-term maturities are manageable, the agency added.
For the last 12 months ended Aug. 1, the total debt-to-operating EBITDA was 5.8 times, down from peak leverage of 48.7 times during the last-12-months period ended Nov. 1, 2009.
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