S&P Global Ratings said any wavering of Fonterra's commitment to restore its financial health would put the co-op's credit rating under immediate downward pressure.
The ratings agency said Fonterra's move to write down assets by $860 million and to suspend its dividend was a "painful but necessary" part of the co-operative's turnaround plan.
The impairment charges were "noteworthy" but were non-cash and did not affect Fonterra's fundamental risk profile.
"That said, we forecast the group's underlying earnings for the year ended July 31, 2019, to be materially below the prior year," the agency said.
"Credit metrics could also deteriorate, but to a lesser extent given cash proceeds from asset divestments, reduced capital expenditure, suspension of dividends, and an improved working capital position," it said.
The dividend suspension indicated the group was willing to actively protect the interest of creditors.
"We anticipate additional asset divestments, further reductions in capital expenditure, and some normalisation of earnings to restore Fonterra's credit metrics comfortably within our expectations for the 'A-' rating.
"While the cooperative's leverage will remain above its downward ratings trigger at the July balance date, the deleveraging timetable is still broadly consistent with past expectations.
Fonterra's portfolio and strategic reviews woulf result in a more disciplined approach to capital allocation and more versatile operational performance, which should result in a more stable earnings profile.
"That said, we are mindful of execution risks and any wavering of the cooperative's commitment to restoring its financial health would put the rating under immediate downward pressure," the agency said.
S&P analyst Graeme Ferguson said today's announcement cleared the decks for more substantial announcements to be made at next month's annual result.
"They want to get the bad news behind them and this gives them clear air to to enunciate the outcome of their strategic and portfolio reviews," Ferguson told the Herald.
Fonterra's NZX-traded units last traded at $3.58, down 18c or 4.8 per cent from Friday's close.