FONTERRA has had its credit rating downgraded from A to A- by credit rating agency Standard and Poor's.
The dairy giant's chief financial officer Lukas Paravicini said the co-operative's underlying financial strength and credit quality remained strong.
The revised rating would not impact Fonterra's strategy or farmer shareholder payout, he said.
Standard and Poor's credit analyst Brenda Wardlaw said the agency believed Fonterra's financial risk profile had weakened in the past two years, as its capital spending and large debt funded acquisition coincided with a high level of volatility in the global dairy market.
Standard and Poor's acknowledged that a recent increase in global dairy prices, together with reducing capital expenditure, improved working capital, and likely company transformation benefits should improve Fonterra's financial risk profile in the next one-to-two years, Wardlaw said.
"However, we expect the group's financial risk profile to remain more consistent with the 'A-' rating in the next few years, particularly given the potential for further volatility in the global dairy market."
Downward pressure on the rating could occur if Fonterra were to undertake further material debt-funded transactions, Wardlaw said.
Fonterra was still one of the highest credit rated companies in Australia and New Zealand and in the agri-business sector, she said.
Standard and Poor's corporate ratings managing director Anthony Flintoff said A- was a very strong rating and the agency still had a very positive view on Fonterra.
"It can often get lost in the downgrade but we still view this as a extremely strong business model and a very strong credit."
