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Fitch: Volatile U.S. Commodity Costs |
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NEW YORK, Sep 11, 2008 (BUSINESS WIRE) -- Fitch Ratings says in a special report that the uncertainty around the economic environment, combined with volatile commodity costs, may cause ratings and outlooks for the U.S. Household and Personal Care Sector to experience some downward pressure. According to the report, the risk of downgrades will increase if commodity costs experience significant growth and appear to be sustainable for a period of time, as this would continue pressuring margins and cash flow for some major players in the sector, including Kimberly-Clark and Clorox.
"Unexpected escalating oil prices caused the U.S. Household and Personal Care sector to react quickly and aggressively this year with substantial price increases which may cause consumer sticker shock and short-term volume declines," said Grace Barnett, Director at Fitch Ratings. "With commodity costs forecasted to remain volatile and the dollar stabilizing or strengthening, revenue growth rates are expected to decline in the near term. However, most of the companies rated by Fitch in this sector in addition to Procter & Gamble (P&G) and Church & Dwight have abundant liquidity to address near-term needs."
The report continues to say that much of the impact on ratings and outlooks depends on where key commodity costs stabilize. Since the peak reached in July 2008, a slowing global economy with declining demand and a change in the view of investors who were using commodities as a financial asset class, has led to a demand in commodity prices. If overall commodity costs considerably decline and the drop is sustained, further supplemented by the latest round of price increases, sector margins could widen.
For a more detailed view on the differing impacts of soaring U.S. commodity prices on the domestic household and personal care sector of the consumer packaged goods industry, please visit fitchratings.com for the special report, 'Observations of High Commodity Costs on the U.S. Household and Personal Care Sector'.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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