Fitch affirms Aveng at 'A(zaf)' outlook stable

Posted On Tuesday, 14 December 2010 02:00 Published by Commercial Property News
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Fitch Ratings has affirmed South African Aveng Limited's National Long-term rating at 'A(zaf)'.

Roger JardineFitch Ratings has affirmed South African Aveng Limited's (Aveng) National Long-term rating at 'A(zaf)'. The National Short-term rating was also affirmed at 'F1(zaf)'. The Outlook for the Long-term rating is Stable.

The ratings and outlook continue to be supported by Aveng's strong liquidity position which remained superior to most of its domestic peers as at financial year ending 30 June 2010 (FYE10).

"The group maintained a net cash position in excess of ZAR7.4bn at FYE10, which continues to provide the company with a high degree of financial flexibility.

Whilst Fitch places strong reliance on Aveng's current surplus cash position, the agency highlights the risk that over the medium term a significant portion of this could be eroded through share repurchases, distributions and acquisitions, which could ultimately place
pressure on the current ratings.

"The current ratings are also supported by the expectation that the planned public infrastructure spending by government should remain stable in South Africa during 2011 and 2012.

Fitch believes that this will benefit the construction and engineering sector, which experienced a slowdown on the back of the economic downturn in 2009 and early 2010," the rating agency said.

Fitch believes that Aveng, together with its other major South African peer, Murray and Roberts Holdings Limited (not rated), will receive a significant share of the planned government and state-owned enterprises infrastructure development projects in South Africa over the following five years.

Even if a portion of the spending is deferred, which Fitch views as likely, there should still be sufficient critical power and water projects to sustain the operations for these construction companies, albeit at possibly lower operating margins.

Aveng's ratings may be impacted by a significant weakening in its balance sheet flexibility, as evident from an erosion of cash reserves or a significant increase in gross debt, leading to a shift from a net cash to a net debt position.

Aveng is a South African-based infrastructure development group working actively in more than 28 countries.

It provides a diverse range of services, products and solutions in engineering, construction, mining, steel and manufacturing. Its operations include Grinaker-LTA, Trident Steel, Aveng Manufacturing, Moolmans, Engineering & Projects Company and Australian based construction company, McConnell Dowell.

Last modified on Monday, 24 June 2013 23:09

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