Standard & Poor said on Wednesday that the rating on Burns Philp relies heavily on the 'successful and timely?integration of the Goodman Fielder businesses, especially given the competitive pressures faced by the yeast and bakery businesses in the near term.
""Burns Philp needs to achieve its growth and return targets, further synergies and cost savings, and apply free cash to debt reduction, to ensure that financial coverage measures do not fall below levels commensurate with the rating," said Standard & Poor's credit analyst Lucie Kistler.
Net profit slumped in the December half by 9.3 per cent to A$86.3 million on earnings of $1.73 billion. Net profit during the December half was A$9 million below the A$95.1 million reported from A$642.9 million in sales in the second half of 2002.
Figures released to the Australian stock exchange showed Burns Philp's debt had risen to A$2.72 billion by 31 December.
'The performance of the company's North American yeast business continued to deteriorate, due to strong competition from USA Yeast (not rated), and an appreciating Australian dollar against the US dollar,?/i> said the ratings agency.
The company's herbs and spices division was knocked by the strengthening Australian currency and declining retail volumes. Earnings from the North American herbs and spices businesses fell 44 per cent to A$24.1 million.
However, the Latin American yeast business performed well, due to the contribution from the Fleischmann's business acquired in 2002, and trading conditions improved in Turkey, said Standard & Poor.
Under a hostile bid, Burns Philp last year bought Australia's biggest foodmaker Goodman Fielder for about A$2 billion in a mainly debt-funded acquisition.