Mondelez International, Inc.
--Long-term Issuer Default Rating (IDR) 'BBB';
--Senior unsecured debt 'BBB';
--Credit facility 'BBB';
--Short-term IDR 'F2';
--Commercial paper 'F2'.
In addition, Fitch has withdrawn the 'BBB' long-term IDRs of
The Rating Watch follows Mondelez's recent announcement that the company and D.E Master Blenders 1753 B.V. (DEMB) intend to combine their respective coffee businesses, along with Mondelez's announcement of a new
KEY RATING DRIVERS:
Rating Watch On Financial Strategy Uncertainty: Mondelez recently announced its intention to contribute its coffee business, which generated approximately
Leverage Under Pressure: Fitch estimates that near term leverage could remain in the low 3x range, up from approximately 3.0x in 2013. Total debt is up
Restructuring Benefits Unlikely To Impact The Near Term: Mondelez expects to improve adjusted operating margins to 15% to 16% by 2016, up from approximately 12% in 2013, as zero based budgeting and the accelerated restructuring program outweigh modestly lower margins due to the exit of coffee. This should help replace the coffee EBITDA over time, but not enough to alleviate near term leverage pressure.
Scale And Diverse Geographies: Mondelez is still one of the largest global packaged food companies with approximately
Top-Line Pressure: Although Mondelez has approximately 40% of its revenue in faster growing emerging markets, the company is experiencing a broad-based global macroeconomic slowdown in key categories. As a result, Mondelez has steadily reduced its top line growth guidance, which is now approximately 3% for 2014. This is largely consistent with global category growth.
Ample Liquidity: Mondelez's liquidity at
Future developments that may, individually or collectively, lead to a negative rating action include:
--If earnings or cash flow falter significantly or financial policies prove to be aggressive, such that leverage is consistently above the low 3.0x range.
Future developments that may, individually or collectively, lead to a positive rating action include:
--The Rating Watch could be resolved with an affirmation of the ratings if the company generates substantial and growing free cash flow (FCF), along with leverage consistently below approximately 3.0x.
--Maintenance of conservative financial policies, such as balancing share repurchases with a substantial amount of debt reduction, and progress toward achieving the company's stated margin improvement, would also support affirmation the current ratings.
Additional information is available at 'www.fitchratings.com'.
--'Corporate Rating Methodology' (
Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage
Source: Fitch Ratings
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