TEXT-Fitch: EMEA capital goods 2013 outlook remains stable
Link to Fitch Ratings' Report: 2013 Outlook: EMEA Capital GoodsDec 11 - Fitch Ratings says in its 2013 outlook report that on aggregate, EMEA capital goods companies have adequate financial flexibility and liquidity to cope with uncertain economic conditions, which remain key risks. Together with modestly improving cash generation in 2013, this supports an overall stable outlook for the sector in the coming year. Fitch forecasts revenue growth of less than 3% and flat margins for EMEA capital goods companies, as 2013 is expected to be another challenging year for the industry. The operating environment remains difficult. Global capex is set to grow at a slow pace and consumer confidence is on a downward trend in Europe. Manufacturers' inability to pass on cost inflation continues to weigh on earnings generation, as competitive pressure and excess capacity remain present in the sector. However, companies' renewed focus on cost cutting and portfolio realignments will support margin improvements in the medium term. Modestly positive free cash flow and limited deleveraging in 2013 means that capacity for further transformational acquisitions and/or large shareholder returns remains limited. Although not part of Fitch's central rating case, a material slow-down in emerging markets, coupled with excess cash and/or buy-back boosted share prices could motivate some M&A "to buy growth" in 2013. The full report, ''2013 Outlook: EMEA Capital Goods" is available at fitchratings.com. Additional information is available at www.fitchratings.com.
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