Bangkok--21 Apr--Standard & Poor's
The credit outlook for U.S. consumer products companies in 2011 may not be the same outlook it had in 2010, according to a report just published on RatingsDirect. The article, titled "U.S. Consumer Products Credit Quality May Not Stack Up Against 2010 Credit Quality Despite Sector Economic Stability," says that economic conditions in the sector should be stable to positive for the next two years, according to Standard & Poor's Ratings Services' baseline economic projections. But we believe margins at consumer products companies will be pressured if higher prices for energy, food, and clothing cause consumers to reduce spending just when input costs are rising.
Still, we think ratings on most consumer products companies can withstand lower sales because many companies have already lowered their cost structures, increased cash flows, and improved liquidity by paying down debt, extending maturities, or loosening covenants. Therefore, we believe the ratio of upgrades to downgrades will be flat to slightly positive in 2011, compared with 1.5 to 1 in 2010.
In addition, we do not believe the recent increase in oil prices will derail the economic recovery in the U.S. However, a further meaningful, sustained rise--potentially because of concerns about supply from North Africa and the Middle East--or increased demand from emerging markets could stunt demand growth if consumers are forced to pay more for energy and related products.
The report is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to
[email protected]. Ratings information can also be found on Standard & Poor's public Web site by using the Ratings search box located in the left column at www.standardandpoors.com. Members of the media may request a copy of this report by contacting the media representative provided.
Media Contact:
Mimi Barker, New York (1) 212.438.5054,
[email protected]
Analyst Contacts:
Diane Shand, New York (1) 212-438-7860
Beth Ann Bovino, New York (1) 212-438-1652