burns philp rating raised to ‘bb-’, outlook stable

This is a long term buy and hold. IMHO

Burns Philp Rating Raised To ‘BB-’, Outlook Stable
Melbourne, April 19, 2005—Standard & Poor’s Ratings Services said today that it has raised the rating on
Burns Philp & Co. Ltd. to ‘BB-’ from ‘B+’. The outlook is stable. The ratings on Burns Philp Capital Pty.
Ltd.’s subordinated issues are revised to ‘B’ from ‘B-’.
“The rating upgrade reflects the improvement in underlying financial performance in the six months to Dec.
31, 2004, as well as the significant debt reduction and resulting improvement in liquidity following the sale
of the yeast and herbs and spices business units in September 2004,” said Standard & Poor’s credit analyst,
Brenda Wardlaw, Corporate & Infrastructure Finance Ratings.
In September 2004, Burns Philp repaid its A$1.55 billion of senior secured credit facilities, using the
proceeds from the sale of its yeast and bakery ingredients group and herbs and spices division.
“Consequently, at Dec. 31, 2004, Burns Philp’s operating lease adjusted total debt to total capitalization was
just below 50%, a significant reduction from 82.5% as at June 30, 2004,” said Ms. Wardlaw. Australia and
New Zealand are now the company’s principal markets. Although the divestment of the yeast and bakery
and the Tones Bros. businesses has reduced the company’s geographic and product diversity, their disposal
has also largely removed the seasonality of Burns Philp’s earnings.
The former Goodman Fielder businesses, now the sole focus of Burns Philp, have historically generated
stable cash flows, and benefit from a strong and diversified product portfolio within Australia and New
Zealand. The company’s underlying operating income to sales margin moderated to 18.4% in the first half of
2005 from 20.7% in fiscal 2004, reflecting the increased contribution from the lower -margin Goodman
Fielder business. The three remaining operating segments, namely baking, snacks, and spreads and oils,
reported significantly improved earnings, reflecting the benefits of restructuring.
“A key rating factor is Burns Philp’s appetite for debt-funded acquisitions, and management’s comfort with
a highly leveraged balance sheet, although uncertainty surrounds the size, scope, and location of future
acquisitions,” added Ms. Wardlaw.
About Standard & Poor’s
Standard & Poor's is the world's foremost provider of independent credit ratings, indices, risk evaluation,
investment research, data, and valuations. With 6,000 employees located in 21 countries, Standard & Poor's
is an essential part of the world's financial infrastructure and provides investors with the independent
benchmarks they need to feel more confident about their investment and financial decisions. In Australia, we
have been voted INSTO “Rating Agency of the Year” for the fifth year running. For more information, visit
www.standardandpoors.com.au.