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Investing.com -- Moody’s Ratings has affirmed Utz Quality Foods’ B2 Corporate Family Rating while changing the outlook to negative from stable, citing elevated debt levels and weak free cash flow.
The rating agency noted that Utz’s debt-to-EBITDA leverage stands at 8.2x (Moody’s adjusted) for the twelve months ended June 29, 2025. The high leverage partly stems from ongoing investments supporting long-term earnings growth and seasonal working capital needs that increased debt in the first half of 2025.
Moody’s projects negative free cash flow of $25-35 million for 2025 after dividends and distributions, reflecting significant outlays for business transformation and supply chain initiatives.
Despite these concerns, Moody’s maintained the B2 rating based on expectations that leverage will improve to 5-6x over the next 12-18 months. This improvement is anticipated to come from earnings growth driven by productivity savings and revenue expansion from strategic investments.
The agency expects free cash flow to approach breakeven in 2026, supported by earnings growth and reduced capital spending, with a material reduction in investment levels anticipated in 2027.
Utz maintains good liquidity with $116 million available under its $225 million ABL revolving credit facility and $55 million in cash as of June 29, 2025. The company’s SGL-2 speculative grade liquidity rating remains unchanged.
Moody’s highlighted execution risk given Utz’s history of negative free cash flow and the competitive nature of the salty snack market. The agency also noted that Utz’s dividend appears aggressive considering the company’s growth-oriented strategy.
A rating upgrade could occur if Utz demonstrates sustained positive organic revenue growth with higher EBITDA margins, maintains debt-to-EBITDA below 5.0x, and consistently generates positive free cash flow. Conversely, a downgrade could happen if earnings weaken, free cash flow remains negative, or if debt-to-EBITDA stays above 6.5x.
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