But the general prognosis looks good. At the same time, the food giant's 'AAA/A-1+' long- and short-term corporate credit ratings were affirmed, on the back of a strong financial performance.
"The stable outlook reflects Nestle's restoration of the adjusted funds from operations-to-net debt ratio to above 90 per cent at year-end 2005 and Standard & Poor's expectations that the group will maintain this minimum level," said Standard & Poor's credit analyst Nicolas Baudouin.
The analyst said that the ratings continue to be supported by Nestle's excellent business risk profile as the largest player worldwide in the stable and cash-generative branded and packaged food industry.
Nestle boasts a broadly diversified business portfolio, with leading market shares worldwide in numerous product categories, including soluble coffee; bottled water; condensed, evaporated, and powdered milk; baby food; ice cream; frozen prepared dishes; culinary preparations; and chocolate.
The group also benefits from widely recognised, strong brands; its six global brands, including Nestle, account for about 70 per cent of consolidated sales.
In addition, Standard & Poor's also pointed out that Nestle's extensive geographic coverage encompasses top positions in North America - especially the US - and Europe, as well as in emerging markets, where the group generates about 30 per cent of consolidated sales.
Nestle delivered 2005 consolidated sales of Swiss franc (SFr) 91 billion.
However, although Nestle is set to hold onto its rock-solid business positions, keeping funds from operations (FFO) to net debt at more than 90 per cent may not be easy if the group makes a sizable acquisition without sharply curtailing share repurchases or divesting non-core assets.
Standard & Poor's said that the ratings could be lowered, with no outlook revision to negative, in the event of significant and prolonged deterioration of the group's financial measures below the minimum commensurate with the 'AAA' rating category.