Moody’s lowers Avon Products

Moody's Investors Service said it downgraded Avon Products, Inc.'s corporate family rating to Ba2 from Ba1, probability of default rating to Ba2-PD and lowered the speculative grade liquidity rating to SGL-2.

The outlook is negative.

The downgrade reflects Moody's concern that efforts to improve operating performance are not sufficient to offset the confluence of headwinds the company is facing – including FX volatility, inflation, the IPI tax in Brazil and the continuing decline in active representatives.

Moody's expects that free cash flow will decline meaningfully and leverage will increase to more than 5 times by the end of 2015.

"It may be difficult for Avon to turn around its performance given the competitive and macroeconomic challenges the company is facing in key markets – particularly since it is happening against a backdrop of significant FX volatility that is diminishing operating cash flow," Moody's senior analyst and vice president Nancy Meadows said in a news release.

That said, Avon benefits from significant scale, a global footprint, good liquidity and no near-term maturities, the agency noted.

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