S&P Upgrades Herbalife to 'BB-' on Improved Operations

Key Rating Upgrade Announced

S&P Global Ratings has upgraded Herbalife Ltd. (NYSE:HLF) to 'BB-' from 'B+', reflecting improved operating performance and management's commitment to its financial policies. The rating agency assigned a stable outlook to the company.

The upgrade is primarily driven by Herbalife's stronger operational trends and a clear strategy to reduce its gross debt to $1.4 billion by 2028, alongside a commitment to a 3x gross leverage target.

Operational and Financial Overview

Herbalife demonstrated significant financial improvement in 2023, with a 15% expansion in S&P Global Ratings-adjusted EBITDA to $700 million. This performance was supported by a 0.9% increase in net revenue, largely through pricing adjustments.

The company also focused on deleveraging, repaying approximately $280 million of debt. This action successfully reduced its leverage ratio to 3.1x at the end of 2023, down from 4.1x in 2022.

Future Outlook and Projections

Looking ahead, S&P forecasts continued positive momentum. While adjusted leverage may modestly increase to 3.3x post-refinancing, it is projected to decrease to 2.9x in 2024 and 2.5x in 2025.

Projections for 2024 include 2.8% revenue growth and a 6% increase in adjusted EBITDA to $740 million, which is expected to generate about $260 million in free operating cash flow for further debt repayment.

Summary

The rating upgrade and stable outlook signal confidence in Herbalife's financial strategy. The company's focus on enhancing distributor productivity, managing debt, and generating consistent cash flow are key factors supporting its improved credit profile.

FAQ

Q: Why did S&P upgrade Herbalife's rating?
A: The upgrade was driven by improved operating trends, a commitment to reducing gross leverage, and a clear strategic plan to lower its gross debt.

Q: What is Herbalife's new credit rating?
A: S&P Global Ratings upgraded Herbalife's issuer credit rating to 'BB-' from 'B+' and assigned a stable outlook.

Source: Investing.com