Close

S&P Revises Outlook on Kimberly-Clark (KMB) to Negative; Notes High Level of Shareholder Payments

February 1, 2016 2:49 PM EST

Standard & Poor's Ratings Services said that it revised the outlook on Kimberly-Clark Corp. (NYSE: KMB) to negative from stable. At the same time, we affirmed all of its ratings including our 'A' long-term and 'A-1' short-term corporate credit ratings on the company. Reported debt outstanding as of Dec. 31, 2015 was $7.8 billion.

The outlook revision reflects the company's continued high level of shareholder payments, despite pressure on its credit metrics stemming from ongoing currency headwinds and an increasingly fragile global economy. These factors, as well as a tough global pricing environment, temper organic growth potential, resulting in downside risk that the company's credit metrics could weaken below our current expectations.

"Our ratings on Kimberly-Clark incorporate the company's solid market shares in North American tissue and global diapers, incontinence care, and feminine care; its portfolio of well-known brand names--most of which have high consumer brand equity; the nondiscretionary demand for most of the product segments in which KMB competes; its good geographic diversification; solid profitability; and ongoing restructuring initiatives," said Standard & Poor's analyst Gerald Phelan.

The negative outlook reflects Kimberly-Clark's continued high level of shareholder payments, despite pressure on its credit metrics stemming from ongoing currency headwinds and an increasingly fragile global economy. These factors may make it difficult for the company to raise prices--especially to offset potential further emerging market currency weakness--and improve EBITDA. In addition, we have less confidence that the company will take actions to offset a potential weakening in credit metrics, including by meaningfully reducing share buybacks. We could lower the ratings over the next two years if FFO to debt falls below 35% or debt to EBITDA exceeds 2x on a sustained basis. Compared with our 2017 forecast, we estimate this could occur if debt increases by $850 million or EBITDA declines by about 10%. If we lower our long-term corporate credit rating to 'A-', we would also lower our short-term credit rating to 'A-2' from 'A-1'.



Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

Credit Ratings

Related Entities

Standard & Poor's, Raising Prices