Revenue Growth and Margins Under Pressure for APAC Corporates

The financial profile of the median corporates rated by Fitch Ratings in Asia-Pacific (APAC) weakened over 2010 to 2012 due to slowing revenue growth, shrinking margins and rising capital expenditure (capex).


Revenue growth slowed substantially to around 5% in 2012 from well above 10% in 2011, and Fitch said that it expects continued anemic economic growth in developed markets will restrict the median APAC corporate's revenue growth at 5% in 2013 and 2014.


Fitch expects to see a small overall improvement in the median corporates financial profile in 2013 and 2014 due to a stabilisation in both margins and capex. Median free cash flow (FCF) generation should move into positive territory in 2013 and 2014, albeit marginally.


Key risks to Fitch's financial forecasts include the possibility of slower-than-expected growth in China, and zero to negative gross domestic product (GDP) growth in some major developed economies.


The analysis in Fitch’s report, entitled ‘Asia-Pacific Corporates: Financial Forecast Update’, is based on a sample of 184 corporates with international ratings, spanning 15 countries across APAC and containing a consistent sample of both historical and forecast data over 2010 to 2014.


The first half of the report contains key analysis on Fitch's 2013 and 2014 financial forecasts for the overall sample APAC corporate portfolio.


The second half of the report contains specific analysis and commentary on the agency's 2013 and 2014 forecasts for eight major corporate sectors in APAC: autos; China fixed-asset investment; electricity/gas utilities; gaming; Greater China property; oil and gas; technology and telecoms.