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Strategies & Market Trends : Value Investing
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To: Elroy who wrote (73871)10/5/2023 2:53:16 PM
From: Sean Collett1 Recommendation

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That debt is pretty intense though. They have $551M due in 2026 from their B tranche and then $876M due in 2025 plus another $550M due in 2027. Not very termed out which makes this debt much riskier. The interest expense is ballooning in their recent 10-Q.

The debt level itself doesn't worry me, but the due dates are really close and interest expense is growing. They pass the current ratio test but fail the quick/acid screen.

Good brand strength but I could see consumers going for off-brand items in future quarters as discretionary spending tightens, and while every company would be at risk, I think the debt maturities are too big a risk if revenues decline here. Now I am not too familiar with them so it's possible they also relabel and make off-brand products too, but either way then you're looking at minimum future margin declines as product mix changes.

It does seem some food items are seeing disinflation now (e.g., eggs, palm oil, sunflower oil, canola) and IMO that is a risk here as they are already reporting lower sales volumes in their 10-Q and they have made-up the difference via price increases which will not be possible moving forward.

I would call out that at a high glance the inventory maybe is a concern? At my current 50K ft view it is tough to get a clear picture due to the acquisitions and divestitures they have had.

Just my thoughts taking a quick look in between a meeting.

-Sean
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