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The outlook for U.S. packaged foods as expected by New York-based Fitch Ratings looks stable in 2012 though it considers that packagers and marketers alike will face significant operating challenges. Material strength changes as a result of corporate spinoffs and other structure decisions or operating performance could swing rating actions for food companies either in a positive or negative way.
“While value-conscious consumers contending with heightened grocery prices pose significant risk, it appears that most food companies have already faced their peak commodity cost inflation levels for the near term,” states Judi M. Rossetti, senior director at Fitch. “As a result, cost pressure will ease gradually but remain at heightened levels in 2012, compared to historical inflation. Similarly, gross margins should recoup some lost ground after facing a prolonged margin squeeze for most of 2011.”
The internal ratings agency anticipates that most large, diversified packaged food companies will maintain ample liquidity during 2012. For companies progressing toward the completion of spinoffs, debt reduction will be a priority to maintain leverage appropriate for their current ratings.