September 11, 2013 / 10:23 AM / 4 years ago

Fitch: 2014 Likely a Turning Point for EMEA Corporates

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: EMEA Corporate Cash Generation: 2014 a Turning Point here LONDON, September 11 (Fitch) Aggregate free cash flow among EMEA corporates should turn positive in 2014 as revenue and margin figures also show modest improvement, Fitch Ratings says. Total cash holdings will probably fall further from their 2012 post-global financial crisis high, but this will be due to companies using the cash for debt repayments, rather than a reversal of the conservative financial policies to combat weak market conditions since the onset of the crisis. In a special report, "EMEA Corporate Cash Generation: 2014 a Turning Point," published today, we forecast that improving free cash flow (FCF) in the consumer and healthcare, telecom media and technology, and industrial sectors should drive the return to aggregate positive FCF after two years of negative figures. The turnaround will be driven by a combination of recent investment in faster-growing emerging markets and aggressive cost-cutting, also leading to stronger margins. Anheuser Busch InBev, Roche Holding and Sanofi will be among the biggest generators of FCF, helped by stable demand in the healthcare and food retail sectors. Conversely, significant capital expenditure by transport companies such as JSC Russian Railways and South Africa's Transnet SOC will contribute to negative FCF in the utilities and transport sectors, which will be the main drag on the aggregate figures. Our analysis, which discusses over 40 Fitch-rated EMEA corporates, forecasts total cash holdings to drop by over USD130bn over 2013 and 2014. This will help pay off around USD140bn of gross debt, leaving companies' net debt position largely unchanged from 2012. This could change if companies were to implement less cautious financial policies and delay their debt repayment, for example in response to shareholder demands or to make the most of improving market conditions as the eurozone shows early signs of returning to growth. However, overall we believe that a sustained euro area recovery remains fragile and that corporates will maintain their focus on conservative policies and balance-sheet strength in the short term. For more details of our expectations across the region, including our forecasts for capex and M&A activity sector by sector, see the full report, available at Contact: Roelof Steenekamp Director Corporates +44 20 3530 1374 Fitch Ratings Limited 30 North Colonnade London E14 5GN Edouard Porcher Performance and Data Analyst Corporates +44 20 3530 1270 Simon Kennedy Director Fitch Wire +44 20 3530 1387 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email:; Hannah Huntly, London, Tel: +44 20 3530 1153, Email: The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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