Fitch alters Campbell Soup view to stable

Fitch Ratings said it changed the outlook to stable from negative and affirmed Campbell Soup Co.’s long-term issuer default rating at BBB.

“The ratings reflect Campbell’s strong brands, significant market share in several product categories led by soup, solid profit margins and consistent FCF generation. The stabilization in the ratings outlook reflects Fitch’s expectation that gross leverage (total gross debt/EBITDA) will decline to 3.2x in fiscal 2021 (ending July), assuming the company pays down $921 million of debt maturing in 2021 (March-May). This compares to total debt/EBITDA of 4.9x at the end of fiscal 2019 and 3.5x at the end of fiscal 2020,” Fitch said in a press release.

The agency said it forecasts Campbell to generate annual FCF of $400 million to $450 million, $225 million in fiscal 2021, which reflects $200 million in working capital use, and use excess cash for shareholder returns and/or tuck-in acquisitions, in the context of maintaining gross debt/EBITDA under 3.5x.

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