Fitch Ratings has affirmed the Issuer Default Rating (IDR) and
outstanding debt of Campbell Soup Company (Campbell's) as follows:
-- Long-term IDR at 'A';
-- Senior unsecured debt at 'A';
-- Short-term IDR at 'F1';
-- Commercial paper (CP) at 'F1'.
The Rating Outlook is Stable. Campbell's total debt was $2.6 billion,
including $661 million of CP, at Aug. 3, 2008.
Campbell's ratings and Outlook are based on a continuation of the
company's balanced financial strategy. The ratings incorporate
Campbell's leading position in the high margin soup category and the
strength of its branded product portfolio. The ratings also consider the
mature and highly competitive nature of the U.S. soup market. Campbell's
overall EBITDA margins are among the best in the packaged food industry,
despite recent margin pressure due to heightened input costs. Campbell's
recent pricing actions are expected to generate better price realization
in fiscal 2009. Pricing, along with productivity initiatives, will be
necessary to offset cost inflation. Campbell's expects ingredient,
packaging and energy costs to increase 9-10% in fiscal 2009, up from
7-8% in fiscal 2008.
Campbell's net sales increased 8% to $8 billion for the fiscal year
ended Aug. 3, 2008 versus the prior year. Excluding a 4% positive impact
from currency, a 1% decline from divestitures and a 2% increase from the
53rd week, net sales rose 3%. Pricing, net of increased promotional
spending, was 1%, which was low given the significant commodity cost
increases incurred. Volume and mix added 2%. Soup sales increased 1%
(excluding the extra week), with condensed soup sales flat,
ready-to-serve soup up 1% and broth up 11%. The company has increased
innovation to drive sales growth in fiscal 2009 with the restaging of
Campbell's Select to Select Harvest lower sodium soups and Select Gold
to V8 aseptic soups.
Overall gross profit fell 100 basis points to 39.6% in fiscal 2008 due
to the impact of cost inflation, partially offset by pricing and
productivity initiatives. Operating earnings increased 6%, excluding
$175 million of restructuring charges. Cash flow from operations
increased 13.6% to $766 million due to lower payments on hedging
transactions and lower working capital, partially offset by tax payments
on the Godiva divestiture. Fitch expects Campbell's to generate higher
cash flow from operations in fiscal 2009 due to earnings growth and the
absence of one-time items.
