Euro 1 trillion buffer for EMEA Inc against Brexit

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The top four EMEA sectors — energy, utilities, telecoms and autos — held about 59 per cent of total cash in December 2015.
The top four EMEA sectors - energy, utilities, telecoms and autos - held about 59 per cent of total cash in December 2015.

Dubai - Liquidity remains solid overall for EMEA rated non-financial companies, and is supported by the high aggregate cash pile

By Issac John

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Published: Thu 30 Jun 2016, 12:00 AM

Last updated: Thu 30 Jun 2016, 10:57 PM

A five per cent surge in cash pile recorded by non-financial corporates in the Europe Middle East and Africa region in 2015 to nearly one trillion euros will provide a buffer against market uncertainties such as Brexit, Moody's Investors Service said.
The cash holdings of rated non-financial companies in EMEA climbed to 921 billion euros in aggregate as of December 2015, from 881 billion euros the previous year, a report by the ratings agency said.
"Despite the prolonged slump in commodity prices, liquidity remains solid overall for EMEA rated non-financial companies, and is supported by the high aggregate cash pile. These corporates' strong liquidity profiles provide an additional buffer against potential market uncertainties following the Brexit vote," said Richard Morawetz, Moody's Group Credit Officer for the Corporate Finance Group and author of the report.
Titled "EMEA Non-Financial Companies: Cash Pile Rises to 921 billion euros and offers a sizeable cushion amidst Brexit uncertainty," the report that around 93 per cent of the rated companies analysed across EMEA have sufficient liquidity to cover debt maturities and other cash requirements over a 12-month period compared with 95 per cent in 2015, an assessment that assumes no access to new funding during the period.
The share of investment grade companies viewed to have liquidity weakness remains very low at three per cent, said the report.
The top four EMEA sectors — energy, utilities, telecoms and autos - held about 59 per cent of total cash in December 2015. Germany, France and the UK accounted for about 52 per cent of total EMEA cash with France leading at 21 per cent.
The top 10 cash-holding companies, which include Electricite de France, Royal Dutch Shell, Volkswagen Aktiengesellschaft, Total and BP held 232 billion euros, or 25 per cent of the total in 2015, marginally higher than in 2014.
"Cash holdings by sector are much more concentrated in the technology sector in the US than in EMEA. The US's top five cash holders in 2015 were all technology companies like Apple and Microsoft. The technology sector made up 46 per cent of the cash holdings of US non-financial companies rated by Moody's. In EMEA, the sector was not represented in the top 10 companies and made up less than two per cent of aggregate corporate cash holdings," said Morawetz.
The US also had a higher share of cash held by investment-grade firms at 87 per cent, compared with 74 per cent in EMEA in 2015.
In 2015, the top 10 cash holders in EMEA represented about 25 per cent of total cash holdings of 921 billion euros, versus 40 per cent of $1.68 trillion in the US.
"This significant difference reflects the substantial sum of cash held by US tech companies, which dominate the top five spots and on average held more than three times as much cash as the top five EMEA cash-holders," said the report.
- issacjohn@khaleejtimes.com

Asia, Australasia 4.8%
North America 2.5%
Eastern Europe 2.2%
Western Europe 1.6%
Middle East, Africa 0.7%
Latin America -2.4%
Source: The Economist Intelligence Unit



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