Fitch Ratings puts Mondelez back on the watch list

Fitch Ratings has assigned a negative rating to Mondelez International's issuance of US$761.45 million 1.6% unsecured notes due 2023. The international ratings agency, one of three designated by the US Securities and Exchange Commission, said the negative outlook reflects its expectation for pressure on free cash flow due to heavy restructuring costs and low core growth. Fitch removed Mondelez from its negative watch list in May 2015, following the European Commissions approval of its coffee business merger with D.E. Master Blenders 1753. Fitch has reported that the company's biscuit and chocolate division, which represents 70 per cent of its post-coffee profile, has experienced lower than category growth rates in the fiscal year to date. “Mondelez is experiencing a broad-based global macroeconomic slowdown in its categories exacerbated by the currency effects of a strong dollar,” said Fitch Ratings. “The foreign exchange had a large negative impact on the top line, as with all multinational companies.” In 2014 the company announced a US$3.5 billion restructuring program to be executed from 2014 to 2018, with US$2.5 billion in cash costs. The purpose is to reduce supply chain and overhead costs by US$1.5 billion by the end of 2018. Fitch anticipates that Mondelez can achieve the bulk of its US$1.5 billion in annualised cost savings targeted by 2018, however, savings are likely to be skewed to the outer years. Mondelez's ratings incorporate its scale as one of the largest global packaged food companies with approximately $30 billion pro forma 2015 net revenue, after $3.8 billion estimated revenue contribution to Jacobs Douwe Egberts.

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