Credit rating organisation Moody's Investors Service has upgraded the Corporate Family Rating (CFR) of fresh produce group Dole Food Company, to B2 from B3.
"The upgrade of Dole's CFR reflects the reduction in adjusted debt due to changes in Moody's approach for capitalising operating leases as well as higher operating efficiencies, both leading to stronger financial metrics," said Moody's.
Higher operating efficiencies are the result of earnings improvement driven by reduced headcount and reinvestment in the business. The company intends to continue upgrading farm equipment and farming practices over time at the farms it purchased in 2014 and 2015. These upgrades will increase operating efficiency at these farms and improve their earnings.
In addition, Dole has three new ships on order with delivery scheduled for the fourth quarter of 2015, the first quarter of 2016 and the second quarter of 2016. These new ships are larger and more efficient than the existing West Coast ships.
"Debt to EBITDA is down significantly to 4.5 times at 28 March 2015 from 7.4 times at 28 December 2013, primarily due to Moody's changed approach for capitalising operating leases and earnings improvement and Moody's expects further leverage improvement as operating efficiencies are realised over the next 12 to 18 months," the group added.