Fitch Affirms Barloworld at 'A+(zaf)'; Withdraws Ratings
Fitch has chosen to withdraw the ratings of Barloworld for commercial reasons, in light of the change in Fitch's regulatory status in South Africa.
KEY RATING DRIVERS
The affirmation reflects the solid operating performance of Barloworld despite economic challenges in many of its markets, with the group delivering increased profit margins and healthy funds flow from operations (FFO) for the financial year ended 30 September 2015 and solid revenue and operating profitability growth for 1H FY16.
The group remains heavily exposed to its key mining equipment sector in southern Africa, but its dominant market position in the region combined with its broad range (including the more recent addition of the extended mining product range) has helped the group to weather tough mining sector conditions. The automotive and logistics sectors continue to provide solid revenue growth opportunities for Barloworld.
The group's working capital outflows and capital expenditure resulted in higher net debt for FY15 and slightly weaker leverage metrics than we expected. However, for 1H16 the group showed a significantly lower working capital outflow than normal for the usual working capital cycle. We expect this will enable the group to generate positive working capital inflows in 2H16, leading to an improved leverage position.