According to The Irish Independent, S&P has cut the credit rating for Valeo Foods, citing its high debt levels and reduced profitability following its leveraged buy-out by US private equity firm Bain Capital last year.
The agency issued a warning and downgrade for the debt-laden owner of Jacob's biscuits, Kettle Crisps, and several other food brands as inflation causes huge price increases.
Pressure On Profitability
S&P increased its debt estimate for Valeo Food to 9x earnings, but said the company still had a stable outlook and wasn’t facing any refinancing risk.
“High operating cost inflation, the customary - albeit reducing - time lag in passing on price increases, and integration costs are pressuring Valeo Foods' profitability,” said S&P.
“In addition, debt levels have increased following debt-funded acquisitions while the capital structure formed in 2021 was already highly leveraged.”
Whilst demand for ambient foods remains steady, consumers' disposable income is decreasing in the main UK and Ireland markets.
According to Kantar's most recent grocery survey, Irish shoppers were responding to 5.5% food inflation by cutting back on branded items.
The market research firm said the branded share of the typical shopper’s basket had fallen to 49% this spring after being above 50pc through 2020 and 2021.
Valeo Foods was formed in 2010 through the merger of Origin Foods and Batchelors by private equity firm CapVest, and is currently headquartered in Dublin.
CapVest grew the Irish-only business into a major player in ambient food over ten years, completing 17 acquisitions and increasing sales to €1.1 billion across 106 markets.
The company was sold last May to Bain Capital, the owner of Burger King, Dunkin’, and Domino’s Pizza, in a deal estimated at €2 billion.
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