Research Update: Koninklijke FrieslandCampina N.V. Downgraded To 'BBB/A-2' On Weak Operating Performance; Outlook Negative

Dairy company Koninklijke FrieslandCampina N.V. (Royal FrieslandCampina or RFC) has reported lower-than-anticipated operating margins for two years in a row, owing to high milk prices and competitive pressure on the infant formula segment in Hong Kong and China. Therefore, our adjusted debt to EBITDA dramatically increased to 4.6x as of year-end 2018 and we expect the ratio to stay above 3.5x over the next 12-24 months. Consequently, we are lowering our ratings on RFC to 'BBB' from 'BBB+'. The outlook is negative, reflecting our view that RFC's turnaround strategy for its Dairy Essentials division might take longer than expected and that pressure on the Specialized Nutrition division could further weigh on margin recovery. The downgrade follows RFC's weaker operating results

...- Dairy company Koninklijke FrieslandCampina N.V. (Royal FrieslandCampina or RFC) has reported lower-than-anticipated operating margins for two years in a row, owing to high milk prices and competitive pressure on the infant formula segment in Hong Kong and China. - Therefore, our adjusted debt to EBITDA dramatically increased to 4.6x as of year-end 2018 and we expect the ratio to stay above 3.5x over the next 12-24 months. - Consequently, we are lowering our ratings on RFC to '###' from '###+'. - The outlook is negative, reflecting our view that RFC's turnaround strategy for its Dairy Essentials division might take longer than expected and that pressure on the Specialized Nutrition division could further weigh on margin recovery....

Research Update