S&P lowers Fortune Brands

S&P said it lowered its ratings on Fortune Brands Innovations Inc. and its senior unsecured debt to BBB from BBB+.

Last year, the issuer spun off its cabinets business, which was its least profitable, which cut into revenues and EBITDA by 38% and 25%, respectively.

“We believe the company's business risk is weakened, specifically, its scale, scope, and diversity, and leverage will not improve enough to compensate for it,” S&P said in a press release.

“In 2023, we expect revenues of about $4.4 billion, or a 7%-8% decline from 2022. The anticipated decline reflects S&P Global Ratings' weaker macroeconomic expectations, which include housing starts falling to 1.2 million units in 2023 compared to 1.6 million in 2022 as well as a 17% drop in new residential construction. We also expect that repair and remodeling spending (which comprises 67% of Fortune sales) could turn negative as disposable income and consumer confidence weakens,” the agency warned.

Still, S&P said it expects the company to maintain leverage in the 2x-2.5x range.

The outlook is stable.

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