Fitch: Corporate Credit Outlook Varies Across EMEA Emerging Markets
Fitch Ratings-London-17 December 2009: Fitch Ratings says in a special report released today that the outlook for corporate credit risk in emerging markets needs to be differentiated from country to country across the region with corporate rating outlooks in Middle East and African countries showing a more stable bias than for those in eastern Europe.
"The key rating drivers of EMEA EM corporate ratings into 2010 will continue to include sovereign rating actions and issuers' capacity to manage their leverage and liquidity profiles," says Raymond Hill, Head of Emerging Markets in Fitch's EMEA Corporate Group.
Economies across eastern Europe, the Middle East and Africa are forecast by Fitch to return to growth in 2010 and macroeconomic recovery is likely to support corporate issuers across the region. Nevertheless, most sovereign rating Outlooks in eastern Europe remain Negative, whereas in the Middle East and Africa Stable Outlooks are more prevalent. Fitch's corporate ratings in the emerging markets are largely concentrated in Russia ('BBB'/Negative), Kazakhstan ('BBB-'/Stable), Ukraine('B-'/Negative), Turkey (('BB+'/Stable) and South Africa ('BBB+'/Negative).
Regional pressures to invest in infrastructure and new production capacity will continue, although the extent to which demand will recover remains uncertain, particularly in the developed export markets. The recovery of commodity prices through 2009 will have a positive impact on local economies and on the performance of companies in commodity-producing countries such as Russia, Kazakhstan and South Africa.
Fitch's rated corporate issuers across the region are forecast by the agency to return to revenue and operating EBITDAR growth in 2010, after expected material contractions of 21% and 31% respectively in 2009. EMEA EM corporate issuers across the region are expected to increase capital expenditures by 14% in 2010 after an 8% contraction in 2009, suggesting capital expenditures will exceed 2008 levels.
While corporate issuers are expected to be free cash flow-negative, leverage levels should remain unchanged based on constant exchange rates. The sectors expected to increase investment levels materially are oil and gas, utilities and transport, with basic materials and telecommunications companies maintaining meaningful investment levels.
The report, entitled 'EMEA Emerging Market Corporate Outlook 2010', is available on www.fitchratings.com.
Contacts: Raymond Hill, London, Tel: +44 (0) 20 7417 4314.
Media Relations: Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364, Email: peter.fitzpatrick@fitchratings.com.
Additional information is available on www.fitchratings.com.
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