Coca-Cola Amatil (CCA) has had its credit rating cut by Standard & Poor’s (S&P), taking the company from A- to BBB+. The cut is said to be due to weak profit margins continuing to impact operating performance.
According to the ABC, S&P said the new rating is still investment grade and Coca-Cola’s outlook remains stable although further downward rating pressure could happen if the company’s debt to earnings ratio substantially rises, its cash flow weakens or there is reduced support from The Coca-Cola Company. The latter owns 29.2 per cent of the firm which is licensed to produce and sell its products in Australia, New Zealand, Indonesia and some Pacific Islands.
Speaking on the downgrade, S&P credit analyst May Zhong said: “This deterioration was reflected in CCA’s earnings downgrade announced on April 11, 2014, which was materially below our previous expectations”.
She added: “CCA’s future depends largely on its ability to return to previous successes in the Australian market, which could result in an upgrade if local profitability is restored. In our view, the stability of the Australian beverage business is critical to the rating on CCA, as it provides a solid operating base for the company to expand into more volatile Asian markets”.