Fitch affirms Fonterra at 'A'; Outlook ‘Stable’

The US-based ratings agency, Fitch Ratings, published its latest report on New Zealand’s Fonterra Co-operative Group Limited's (Fonterra), affirming the dairy giant’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'A', with the Outlook ‘Stable’.

Fitch has also affirmed Fonterra's Short-Term IDR at 'F1'. A full list of rating actions is at the end of the commentary.

Key Quotes:

“The affirmation follows a review of Fonterra's results for the financial year ended 31 July 2016 (FY16), which show an improvement in Fonterra's credit profile.”

“Fonterra's leverage improved as global dairy prices began to stabilise and Fonterra returned to historical levels of advance rate milk payments.“

“Retention of milk payments to farmer-shareholders increased after a steep decline in FY15, when Fonterra elected to fund around NZD0.9bn in higher advance payments with debt following a sharp fall in global dairy prices.”

“The Stable Outlook reflects our view that Fonterra's leverage will improve to around 2.0x by FY20, remaining in line with the 'A' rating.”

Full Report here