DBRS Confirms Cargill, Incorporated at “A” and R-1 (low), Stable Trends

DBRS Limited (DBRS) has today confirmed Cargill, Incorporated’s (Cargill or the Company) Issuer Rating and Senior Unsecured Debt rating at “A” and Commercial Paper rating at R-1 (low). DBRS also confirmed the 10 1/8% Senior Notes and Commercial Paper ratings of Cargill Limited (guaranteed by Cargill) at “A” and R-1 (low), respectively. All trends are Stable. The confirmation of the ratings reflects continued pressure on earnings through F2016 while acknowledging signs of improvement in Q1 F2017, along with notable cost-reduction efforts and further repayment of balance sheet debt. Cargill’s ratings continue to be supported by its leading market positions and strong product and geographic diversification. The ratings also incorporate the effects of volatility in commodity prices and trading as well as risks related to the Company’s continuing investments in growth.

Cargill’s earnings profile should remain relatively stable and appropriate for the current ratings on a through-the-cycle basis. Although each of the Company’s business segments can experience earnings variance because of a number of factors (i.e., changes in commodity prices and macroeconomic conditions and geopolitical turmoil), the Company overall benefits from the strength of its consolidated geographic and product diversification. DBRS believes that operating performance should continue to benefit over the near to medium term from the Company’s optimization of its portfolio of businesses and its focus on higher-margin value-added products and cost-reduction efforts, including increased use of shared services and declining enterprise resource planning costs. As such, DBRS believes that EBITDA could continue to recover toward the $5.75 billion level (as calculated by DBRS) over the near to medium term.

DBRS believes Cargill’s financial profile should remain acceptable for the current “A” rating over the medium term based on the Company’s cash-generating capacity and healthy credit metrics. Cash flow from operations should continue to track operating income, while capital expenditures are expected to remain relatively flat as the Company continues to invest in organic growth in developed and developing markets. The Company’s dividend payout ratio should continue to be linked to earnings on a two-year trailing basis. DBRS expects that Cargill will continue to use any free cash flow and cash on hand to invest in growth and/or to complete share repurchases from the Company’s employee stock option program and stock compensation plans. DBRS believes that Cargill’s ongoing efforts to review and optimize its portfolio of businesses could result in material acquisitions and/or divestitures, but that any acquisitions will be based on the long-term strategic fit of the business and will not result in any material deterioration of balance sheet quality. However, should credit metrics deteriorate beyond a level considered acceptable for the ratings (i.e., long-term debt-to-EBITDA of 2.25 times) as a result of more aggressive financial management and/or weaker-than-expected operating performance, the ratings could be negatively pressured.

Notes:
All figures are in U.S. dollars unless otherwise noted.

Cargill Limited is guaranteed by Cargill, Incorporated.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodologies are Rating Companies in the Consumer Products Industry; DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers; and DBRS Criteria: Guarantees and Other Forms of Support, which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.

The full report providing additional analytical detail is available by clicking on the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.