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Mead Johnson Nutrition Co. (MJN) S&P Raises Mead Johnson to 'BBB+'; Cites 'Satisfactory' Business Profile

April 23, 2014 9:49 AM EDT
Standard & Poor's Ratings Services said yesterday it raised its rating on Glenview, Ill.-based pediatric nutrition company Mead Johnson Nutrition Co. (NYSEL MJN) by one notch to 'BBB+' from 'BBB'. The outlook is stable. 

At the same time, we raised our senior unsecured debt rating on Mead Johnson's senior unsecured notes to 'BBB' from 'BBB-'. This rating is one notch below our 'BBB+' corporate credit rating on the company, reflecting our opinion that this debt is structurally subordinated to priority obligations at its operating entities. The operating entities generate almost all of the company's cash flow and account for the majority of total assets, but do not guarantee this debt.

At Dec. 31, 2013, Mead Johnson had approximately $1.52 billion of total debt outstanding.

The ratings on Mead Johnson reflect our assessment of the company's "satisfactory" business risk profile and "minimal" financial risk profile. "We revised our view of the company's financial risk profile to 'minimal' from 'modest' to reflect continued improvement in its credit measures," said Standard & Poor's credit analyst Jeff Burian. "Despite recent high ingredient costs and challenging conditions in some of its markets, we expect the company to sustain its low leverage and substantial cash flow."

Standard & Poor's "satisfactory" business risk assessment reflects the company's product and brand concentration, yet substantial market positions, well-recognized brand name, and the geographic diversity of its sales. Despite its relatively narrow product focus, Mead Johnson has strong market positions, including the No. 2 global position within infant formula (which accounted for about 59% of 2013 net revenue) and No. 3 global position in children's nutrition products (about 39% of 2013 net revenue).

The stable outlook reflects our expectations that Mead Johnson will continue to generate substantial cash flows from operations and maintain strong liquidity, while funding its dividends and share repurchases.


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