Fitch upgrades rating on H.J. Heinz

CHICAGO -- Fitch Ratings upgraded its ratings on H.J. Heinz Co. Monday, citing the food maker's conservative financial strategy.

The rating agency raised its long-term issuer default, bank facilities and senior unsecured debt ratings on the company to BBB+ from BBB, moving it up one notch in investment grade territory. The rating outlook is stable.

Fitch said it believes that the company is likely to maintain its consistent, conservative financial strategy and expects it will continue to generate cash flow while keeping its debt levels in a steady and appropriate range. Heinz also has committed to minimal share repurchases and to use overseas cash to fund any acquisitions, which the rating agency said validates its decision.

The company has generated more than $450 million of average annual free cash flow during the past five years, despite a $540 million pension contribution in fiscal 2010, according to Fitch. Heinz's well-funded pension plan minimizes the likelihood of large pension contributions in the near term, which is a common and large risk for many companies.

Additionally, Heinz gets about two-thirds of its revenue from outside the U.S. and its emphasis on emerging markets is expected to be a major growth driver. Fitch said its presence in emerging markets is well-balanced geographically and provides a stronger growth platform than many of its U.S.-based peers.

Heinz shares fell 25 cents to close at $54.72 Monday, faring better than the broader market. Shares dropped 17 cents in afterhours trading.