Moody's lifts Kraft Heinz view to positive

Moody's Investors Service said it affirmed the Baa2 senior secured debt rating, Baa3 senior unsecured debt rating and prime -3 commercial-paper rating on Kraft Heinz Foods Co. and affiliates.

Moody's also said it revised the outlook to positive from stable.

The positive outlook reflects the successful completion of major integration activities related to the 2015 merger of H.J. Heinz Co. and Kraft Foods that formed North America's third largest food company, Moody's explained.

The integration included achieving $1.7 billion of cost savings through zero-based budgeting, which exceeded the company's original budget of $1.5 billion, the agency said.

This has produced a dramatic increase in operating profit margins from about 12% pro forma 2014 to over 27% currently, which is more than 10 percentage points better than the company's package food company peers, Moody's said.

Kraft Heinz also retired $2 billion of its debt since the 2015 merger, reducing its debt-to-EBITDA ratio to more than 4x from about 5.2x, the agency said.

However, if Kraft Heinz is able to remain on track to achieve its near-term goals, which include increasing sales, EBITDA and EBITDA margin in 2018, its debt-to-EBITDA should fall sustainably to less than 4x by year-end, Moody's said.

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