Consumer Durables News

Newell Brands Inc. — Moody’s affirms Newell Brands’ Ba1 CFR; outlook remains positive


Rating Action: Moody’s affirms Newell Brands’ Ba1 CFR; outlook remains positiveGlobal Credit Research – 16 Aug 2022New York, August 16, 2022 — Moody’s Investors Service (“Moody’s”) today affirmed Newell Brands Inc.’s (“Newell”) Ba1 Corporate Family Rating (“CFR”), Ba1-PD Probability of Default Rating, Ba1 unsecured debt instrument ratings, and Not Prime commercial paper rating. The outlook remains positive and the Speculative Grade Liquidity Rating remains unchanged at SGL-1.The affirmation reflects Newell’s large scale and good operating performance arising from sustained organic growth and sound operating profit margins, even during the current inflationary period. Although the company continues to execute well on its commitment to return to organic growth, reduce financial leverage and maintain a more conservative financial policy, risks remain elevated over the next 6-12 months that its performance will be negatively impacted by inflationary pressure on consumers. Moody’s expects that inflationary pressures will remain for the remainder of this year and into next year and this will dampen consumer spending in discretionary segments such as home fragrance, small home appliances, and outdoor & recreational. Additionally, the company’s ability to take pricing actions to offset volume declines may be limited during this period as consumers continue to reduce discretionary spending due to rapidly rising costs of food and fuel. Uncertainty and downside risks remain high during this period. However, Moody’s believes Newell’s focus will be to maintain a moderate financial policy.Moody’s expects financial leverage to be maintained at just below 3.75x debt-to-EBITDA over the next 12-18 months compared to 4.0x as of June 30, 2022. Newell has a stated target net debt-to-EBITDA leverage ratio of 2.5x (based on the company’s calculation) compared to 3.4x as of June 30, 2022, which indicates the company will remain focused on reducing and sustaining leverage at a lower levels. Moody’s also expects the company to generate free cash flow of around $250 million to $275 million over the next 12-18 months, which it could use towards debt repayment, if needed, to offset any profit erosion caused by the current environment. Moody’s believes management’s track record is improving as the company’s strategic direction over the past three years has been consistent and management remains focused on improving margins through initiatives focused on cost reduction and integration of businesses acquired years ago. The company is also focused on some international expansion which should help to offset some inflationary headwinds. The SGL-1 reflects Newell’s very good liquidity with cash on hand of $323 million and $1.25 billion available under the unsecured revolving credit facility expiring in December 2023. The company has $1.1 billion in bonds that mature in April 2023. Moody’s expects the company will seek to proactively refinance the maturity though there is sufficient revolver availability to fund the maturity in the event market access is restricted.The positive outlook reflects Moody’s expectation that Newell will continue to prioritize reducing leverage to their stated target goal and that operating performance will remain stable despite inflationary headwinds. Moody’s expects free cash flow to improve meaningfully in 2023 from a weak near break even level in 2022 due to a reduction in inventory and working capital from elevated levels that is consuming meaningful cash in 2022The following ratings/assessments are affected by today’s action:Affirmations:..Issuer: Newell Brands Inc….. Corporate Family Rating, Affirmed Ba1…. Probability of Default Rating, Affirmed Ba1-PD….Senior Unsecured Commercial Paper, Affirmed NP….Senior Unsecured Medium-Term Note Program, Affirmed (P)Ba1….Senior Unsecured Regular Bond/Debenture, Affirmed Ba1 (LGD4)Outlook Actions:..Issuer: Newell Brands Inc…..Outlook, Remains PositiveRATINGS RATIONALENewell’s Ba1 CFR reflects its large scale, well recognized brands, strong product and geographic diversity, and good free cash flow generation ability. The financial and operating strategies are positioning the company for more consistent performance following a period of significant strategy shifts that included portfolio reshaping through acquisitions and divestitures. The rating is constrained by concerns around the long-term growth prospects of the company’s mature product categories such as appliance and cookware, food storage, and writing which require constant investment to spur growth. The rating also reflects the moderate operating margin and potential pressure from rising input costs and supply chain disruptions. The high dividend payout ratio is also a significant drag on free cash flow.The coronavirus outbreak and the government measures put in place to contain it continue to disrupt economies and credit markets across sectors and regions. Although an economic recovery is underway, continuation will be closely tied to containment of the virus. As a result, there is uncertainty around Moody’s forecasts. Moody’s regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. The consumer durables industry is one of the sectors most meaningfully affected by the coronavirus because of exposure to discretionary spending.Social factors relating to demographics and changes in consumer preferences abetted by technology will continue to influence the long-term demand trends for the company’s products. The company’s diverse business portfolio with a mix of growing products helps mitigate categories where demand is declining, providing some stability to the overall revenue base and good operating cash flow generation.Moody’s views the dividend policy as aggressive but financial policy relating to leverage is moderate and has become more conservative over the last two years. The company continues to maintain a sizable dividend despite divestitures that have reduced the earnings base. However, Newell’s 2.5x target net debt-to-EBITDA leverage (based on the company’s definition) indicates a continued focus by management on reducing leverage either through debt repayment or EBITDA growth. Moody’s believes reducing leverage will improve free cash flow and investment flexibility as the company continues to focus on maintaining sustainable organic revenue growth.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSRatings could be upgraded if Newell delivers good operating execution including sustained organic revenue growth with a stable to higher EBITDA margin while maintaining a financial policy that results in sustained debt to EBITDA leverage below 3.75x. Newell would also need to maintain very good liquidity, solid free cash flow relative to debt, and a consistent strategic direction to be considered for an upgrade.Ratings could be downgraded if Newell’s revenue or EBITDA margin weakens materially, liquidity deteriorates or the company utilizes debt to fund acquisitions or share repurchases. Additionally, the ratings could be downgraded if Newell’s debt-to-EBITDA is sustained above 4.5x or retained-cash-flow to net debt is below 10%.The principal methodology used in these ratings was Consumer Durables published in September 2021 and available at https://ratings.moodys.com/api/rmc-documents/74987. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.Newell Brands Inc. is a global marketer of consumer and commercial products utilized in the home, office and commercial segments. Key brands include Rubbermaid, Sharpie, Mr. Coffee and Yankee Candle. The publicly-traded company generated $10.5 billion of revenue for the 12 months ended June 30, 2022.REGULATORY DISCLOSURESFor further specification of Moody’s key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody’s Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider’s credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the issuer/deal page for the respective issuer on https://ratings.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the EU and is endorsed by Moody’s Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody’s office that issued the credit rating is available on https://ratings.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody’s affiliates outside the UK and is endorsed by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody’s office that issued the credit rating is available on https://ratings.moodys.com.Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating. Maria Iarriccio VP – Senior Credit Officer Corporate Finance Group Moody’s Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 John E. Puchalla, CFA Associate Managing Director Corporate Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody’s Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY’S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS, AND PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS OR PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY’S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY’S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing its Publications.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING, ASSESSMENT, OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any credit rating, agreed to pay to Moody’s Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $5,000,000. MCO and Moody’s Investors Service also maintain policies and procedures to address the independence of Moody’s Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody’s Investors Service and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.Additional terms for Japan only: Moody’s Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody’s Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY100,000 to approximately JPY550,000,000.MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements. ​



Source link