Thursday 28 March 2024
 
»
 
»
ENERGY, AUTO TOP MONEY LIST

Energy, automotive and telecom are among
the most cash-flush industries.

Mideast, Europe corporate cash pile hits $959bn

PARIS, July 9, 2015

Corporate cash piles rose by 6 per cent to EUR870 billion ($959 billion) in the year ending December 2014 in Europe, the Middle East and Africa (EMEA), said a special report published by Moody's Investors Service.

Of this cash pile, EUR211 billion (nearly a quarter) is concentrated in the hands of the top 10 cash holders, which make up 1.48 per cent of the 672 non-financial corporate groups that Moody's rates, explained the new report: "Non-Financial Companies - EMEA: Cash Pile Climbs 6 per cent to €870 Billion”.

"Volkswagen, EDF, BP, Fiat and Poste Italiane are Europe's top-five cash kings, each holding between EUR23 and EUR26 billion. Energy, automotive, telecommunications and utilities continue to be the most cash-flush industries in Europe," said Jean-Michel Carayon, a Moody's senior vice president and author of the report.

"Companies might consider gradually using part of their cash balances, especially if the cost of carrying cash on their balance sheets is high. Capital expenditure will remain the single largest use of corporate cash-flow," he added.

Moody's research shows that the cash pile is increasingly concentrated among the top cash holders, despite an increase in the number of rated issuers in EMEA. This is mainly because large investment-grade companies tend to hold more cash, while newly-rated EMEA companies are mostly highly-indebted issuers, including leverage buyouts (LBOs) which have little cash on their balance sheets.

The rating agency expects companies to continue to retain significant cash balances, as the cost of alternate liquidity (such as committed facilities) is likely to increase with Basel III.

Moody's observes that companies are currently less concerned about funding availability, as ample liquidity (following the European Central Bank's quantitative easing programme) and stronger market appetite, are prompting a shift in behaviour. Holding substantial cash balances is becoming less critical to companies, while substantial liquidity is available in the market.

"While we expect M&A activity in 2015 to remain sustained, companies are finding it more attractive to finance their deals through debt rather than using their cash, due to abundant liquidity and low interest rates," noted Carayon.

While cash levels have soared in the past six years, European companies are likely to begin prioritising growth, including acquisition-led growth. Moody's expects the European bond market to remain the main source of funding for large companies, and increasingly so for medium-sized companies.

Moody's research shows that, on a country-by-country basis, Russian companies' cash holdings diminished in 2014.

The decrease was mainly the result of lower new debt issuance and lower oil prices. Russia's OJSC Gazprom (Ba1 negative) and OJSC Oil Company Rosneft's (Ba1 negative) cash piles have diminished, meaning that they are no longer among the top 10 cash holders.

Italian companies have increased their cash balances. In Germany, cash balances decreased year-on-year in 2014, partly due to a reduction in the cash balances of large cash holders BMW, Daimler and Volkswagen.

Moody's also expects that the total cash pile could stabilise or fall slightly in the future, if companies feel less need to hold substantial cash and it is not cost-efficient. – TradeArabia News Service




Tags: Energy | Moody’s | Automotive |

More Finance & Capital Market Stories

calendarCalendar of Events

Ads