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McCormick aims to use expected 2021 strong cash flow to pay down debt
By Devika Patel
Knoxville, Tenn., March 30 – McCormick & Co., Inc. plans to prioritize paying down debt with its expected strong cash flow in 2021.
“We expect 2021 to be another year of strong cash flow, driven by profit and working capital initiatives and our priority is to continue to have a balanced use of cash, funding investments to fuel growth, returning a significant portion to our shareholders through dividends and paying down debt,” executive vice president and chief financial officer Mike Smith said on the company’s first quarter ended Feb. 28 earnings conference call on Tuesday.
The company took advantage of low interest rates by issuing debt last month.
“In February, we raised $1 billion from the issuance of five-year 0.9% notes and 10-year 1.85% notes,” Smith said.
“We took the opportunity in a low interest rate environment to optimize our long-term financing following our Cholula and FONA acquisitions,” he said.
In November 2020, McCormick agreed to buy Cholula Hot Sauce. In December 2020, McCormick acquired FONA, a North American manufacturer of flavors.
On Feb. 8, McCormick priced $1 billion of notes (Baa2/BBB) in two tranches.
The issuer sold $500 million of 0.9% five-year notes at 99.736 to yield 0.954%, or 48 basis points over Treasuries.
McCormick also sold $500 million of 1.85% 10-year notes at 99.212 to yield 1.937%, or 78 bps over Treasuries.
BofA Securities, Inc., Truist Securities, Inc., Wells Fargo Securities, LLC, BNP Paribas Securities Corp., U.S. Bancorp Investments, Inc. and Mizuho Securities USA LLC were the joint bookrunners.
Proceeds will be used to repay a portion of the company’s outstanding commercial paper borrowings.
McCormick is a spice company based in Sparks, Md.
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