RPT-Fitch: Stable outlook for EMEA building materials driven by modest recovery & increased efficiency
Dec 10 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings says its stable rating outlook for EMEA building materials in 2014 will be driven by a modest market recovery and increased company efficiency. This is despite most of the issuers in Fitch's EMEA building materials portfolio, including Saint-Gobain (BBB+/Stable), CRH (BBB/Stable) and Holcim (BBB/Stable), entering 2014 with worsened leverage ratios, as disappointing operating performance in 2013 caused credit metrics to weaken.
Fitch estimates the decline in volumes has bottomed out in most countries, after a disappointing 2013, which was also penalised by unfavourable weather conditions. However, the 2014 sector outlook remains uneven across developed markets and short-term volatility remains high in emerging countries. A well-diversified geographical presence and a favourable regional footprint remain major credit drivers. We expect HeidelbergCement (BB+/Stable) to again outperform its peers thanks to its presence in solid markets, while Lafarge (BB+/Stable) and Saint-Gobain could be penalised by their high exposure to France.
We expect cost-cutting programmes to accelerate in 2014 and 2015. Savings have been offset by volume declines and lower fixed cost absorption in 2013, but companies have generally increased their operational leverage and are now better positioned to exploit any modest recovery in volumes, which supports Fitch's stable outlook for the sector's ratings.
Fitch expects issuers to continue to optimise their asset base, with further asset swaps, the setting-up of JVs, and non-core asset disposals. This process will be driven by the need to reduce capacity in some mature markets, such as Italy or Spain, and by the need to focus investments on high-growth and fast-return core markets and regions. The risk of large debt-funded acquisitions remains limited in the sector.
The report, "2014 Outlook: EMEA Building Materials", is available at www.fitchratings.com or by clicking on the link below.
Link to Fitch Ratings' Report: 2014 Outlook: EMEA Building Materials
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