Research Update: Nestle Affirmed At 'AA-/A-1+'; Outlook Stable

We expect acquisitions and share buybacks to push Nestlé's adjusted debt leverage in excess of 2x in the coming years, attesting to a less conservative financial risk profile. However, Nestlé continues to deliver solid operating results, and enjoys great flexibility stemming from its CHF55 billion, 23% stake in L'Oréal. We therefore affirmed our 'AA-/A-1+' issuer credit ratings on Nestlé. The stable outlook reflects our expectation of continuous strong operating performance, substantial free operating cash flow (FOCF) generation of at least CHF10 billion annually, and the maintenance of the leverage ratio below 2.5x. We have corrected a previous misapplication of our criteria for reflecting subordination risk in corporate issue ratings, which occurred when assessing our issue ratings on Nestlé's debt (see

...- We expect acquisitions and share buybacks to push NestlT's adjusted debt leverage in excess of 2x in the coming years, attesting to a less conservative financial risk profile. - However, NestlT continues to deliver solid operating results, and enjoys great flexibility stemming from its CHF55 billion, 23% stake in L'OrTal. - We therefore affirmed our '##-/A-1+' issuer credit ratings on NestlT. - The stable outlook reflects our expectation of continuous strong operating performance, substantial free operating cash flow (FOCF) generation of at least CHF10 billion annually, and the maintenance of the leverage ratio below 2.5x. - We have corrected a previous misapplication of our criteria for reflecting subordination risk in corporate issue ratings, which occurred when assessing our issue ratings on NestlT's debt (see the Subordination Risk Analysis section). This correction has not had an impact on the ratings....

Research Update