Fitch Affirms Aveng at 'A(zaf)'; Outlook Stable
Fitch Ratings-London/Johannesburg-12 November 2009: Fitch Ratings has today affirmed South African Aveng limited's (Aveng) National Long-term rating at 'A(zaf)' with a Stable Outlook. The National short-term rating was also affirmed at 'F1(zaf)'.
The ratings are supported by Aveng's significant balance sheet flexibility arising from its large cash reserves and low gross debt levels. Fitch, however, notes that cash reserves declined to ZAR7.9bn at FYE09 from ZAR9.4bn at FYE08 and that the ratings could be adversely affected if such significant erosion continues in the medium term.
During FY09, cash was returned to shareholders through a special dividend and share repurchase, which, together with significant capital expenditure of ZAR2.7bn in FY08, caused negative free cash flow (FCF) of ZAR1.1bn. Despite Fitch's expectations of continuing pressure in the markets in which Aveng operates over the next 12 months, FCF is expected to be positive in FY10, mainly due to a significant portion of FY09 capex being once-off within the Moolmans opencast mining division.
As the largest construction company in South Africa, Aveng is expected to benefit from over ZAR780bn of planned infrastructure development by the South African government and state-owned enterprises (SOEs) between 2010 and 2015. Aveng's strong cash position enables it to successfully compete for large domestic and international construction projects, as evidenced by strong growth in its two-year order book which increased to ZAR31.3bn in October 2009, from ZAR25.8bn at FYE08.
Aveng is a South African construction company with activities in the construction, manufacturing and steel services sectors. Subsidiaries include: Aveng (Africa) (Grinaker LTA), Trident Steel Holdings, Aveng Manufacturing, Moolmans open cast mining and McConnell Dowell Corp.
Contact: Roelof Steenekamp, Johannesburg, Tel: +27 11 380 0903; Karabo Matentji, +27 11 380 0910.
Media Relations: Peter Fitzpatrick, London, Tel: + 44 (0)20 7417 4364, Email: peter.fitzpatrick@fitchratings.com.
Note to Editors: Fitch's National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated 'AAA' and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as 'AAA(zaf)' for National ratings in South Africa. Specific letter grades are not therefore internationally comparable.
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