Fitch ups General Mills' rating to 'stable' from 'negative'

by Eric Schroeder
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CHICAGO — Fitch Ratings has upgraded its rating outlook on Minneapolis-based General Mills, Inc. to "stable" from "negative." The ratings service said the upgrade reflects General Mills’ "leading market positions and strong brand equity in its major product categories such as cereal, yogurt, vegetables, soup and snacks. In addition, the ratings incorporate General Mills’ substantial free cash flow and advantageous competitive position in the packaged food industry’s faster growing categories such as grain snacks, soup and yogurt."

Fitch also said it has been impressed with General Mills’ ability to deliver some of the best margins and operating fundamentals in the food and beverage industry despite recent margin pressure.

"General Mills is expecting 9% input cost inflation in fiscal 2009 versus 7% input cost inflation in fiscal 2008," Fitch said. "Fitch expects margin pressure to continue; however, the company intends to use pricing and productivity initiatives (Holistic Margin Management) to protect margins."

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