Moody’s Investors Service on Thursday lowered its outlook for Tyson Foods Inc. as it expects the largest US meat producer to keep burning cash in the coming 12 to 18 months.

Tyson is experiencing a “deterioration in operating earnings, cash flow, and key credit metrics as a result of a simultaneous downturn in the beef, poultry, and pork markets,” the ratings firm said in a statement.

Moody’s left the company’s credit rating unchanged at Baa2, or two notches above junk, citing adequate liquidity and expectations that the meatpacker will manage costs “aggressively” to preserve cash. Fitch Ratings affirmed Tyson at BBB in August, while S&P Global Ratings has it rated as BBB+ with a negative outlook.

The change in outlook comes as Tyson plans to tap the bond markets for the first time in five years. The meat producer has $1.25 billion in notes maturing in August 2024 and intends to fully refinance the amount, Chief Financial Officer John Tyson said Monday on a call with analysts. “We’d be projecting to refinance any upcoming maturities,” he said.

The Springdale, Arkansas-based company said its net interest expense will climb by 23% to $400 million during the fiscal year that began in October. That would mark the first increase since 2020, according to data compiled by Bloomberg.

Bonds issued by the meat producer have lost an average 1.3% this year, the worst performance compared with peers in a Bloomberg index of investment-grade rated food and beverage companies, which has gained 0.9% during the period.

Tyson on Monday reported a slump in earnings for its latest quarter, with adjusted earnings per share declining 77% to 37 cents compared with a year earlier. The company recorded a goodwill impairment charge of $333 million in its beef segment, which swung to a loss, the first time since 2015. Tyson’s beef operations have been impacted by tight cattle supplies, lower sales volumes and a stronger dollar, which curbs exports. Meanwhile, its pork and chicken businesses struggle with a supply glut.

Tyson has moved to close several chicken facilities and meat-packing plants to streamline its operations and signaled it will continue to seek efficiency gains. The company is committed to maintaining its investment grade credit rating and slashing net debt to below two times earnings before items such as taxes and interest, John Tyson said on the call.

The company declined to comment on the outlook change.

(Updates with more context starting in third paragraph.)

Author: Gerson Freitas Jr.