Fitch: Focus on Costs for U.S. Consumer Product Companies As Revenue Growth Slows

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Fitch Ratings expects overall flat to slightly negative revenue growth in 2013 for U.S. consumer product companies according to an outlook report published today.

Credit metrics and ratings for companies in Fitch's U.S. consumer portfolio are expected to remain relatively unchanged, with a generally stable outlook for 2013. Most issuers have strong liquidity, modest leverage and relatively stable business models. Fitch believes industry participants have significant financial flexibility and a keen focus on maintaining credit metrics appropriate for current rating levels.

Organic growth rates should continue their decline to less than 1% in 2013, compared to approximately 6% in 2007. Innovation will be the key differentiator in spurring growth in mature markets.

Restructuring-related cash charges will impair free-cash-flow (FCF) over the next two years. Fitch estimates that cash charges to fund restructuring programs could exceed $1 billion in 2013, not including additional capital expenditures and implementation costs.

Stock prices in the sector have underperformed, cash balances are robust, and pressure to increase discretionary activities has escalated. However, with an uncertain economic environment and the need to fund restructuring programs, discretionary activities will be muted in 2013 and 2014. In 2013, Fitch expects that only a handful of companies have the financial flexibility to execute sizeable share repurchases.

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