Fitch: Peruvian Corporate Liquidity Remains a Bright Spot
'Upgrades of Peruvian corporates are expected to be rare during the next 12 months, while downgrades and Negative Outlooks are expected to continue,' said Cristina Madero, an Associate Director at Fitch. 'Sluggish economic growth and weak external conditions continue to pressure corporate credit quality.'
Cash relative to short-term debt diminished significantly in 2014 yet remains manageable for most issuers. Approximately 40% of Peruvian corporates fell into the 'very strong' liquidity category last year, as their cash to short-term debt ratio was in excess of 2.5x. These corporates are primarily in the mining/natural resources or the gas/utilities sectors.
Peruvian corporates' negative FCF is among the highest in Latin America. The median FCF/revenue ratio was negative 5.5% for these companies in 2014. This compares with negative 1.7% in Chile and negative 1% in Brazil. FCF trends should improve as capex levels subside. The median capex/depreciation ratio was to 1.8x in 2014. While this was an improvement from 3.0x in 2013, this median investment ratio is the highest in the region.