Nestle's rating cut to A+ by Fitch amid stock buybacks

Tuesday, 22. October 2019 12:37

The planned distribution of 20 billion Swiss francs to shareholders in the next three years prompted Fitch Ratings to lower Nestle SA's long-term and senior unsecured grade to A+ from AA-. The outlook was determined to be stable. The agency revealed on Tuesday that it sees net leverage adjusted for funds from operations or FFO, a closely watched measure of indebtedness, to surpass the threshold of 2.5 times.

In the update, it notes that the existing share buyback scheme, also worth 20 billion Swiss francs, wasn't changed after the acquisition of a license from Starbucks last year for seven billion Swiss francs and that it was actually pushed forward.

The credit appraiser estimated the Swiss food producer's annual organic revenue growth from 2019 to 2022 would land at the lower end of the target range of 4% to 6%. It foresees proceedings from the divestment of the skin health division to come in at 10.2 billion Swiss francs.

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