Eurozone Exposure Not a Key Risk for Most Asia-Pacific Corporates
Fitch Ratings says in a new report that Asia-Pacific corporate exposure to the eurozone crisis is minimal, with only 20 of its 192 rated corporates in this region having meaningful revenue exposure to the EU. Within these 20 names, including Tata Steel, Toyota Motor, Panasonic and Samsung Electronics, a detailed study by Fitch shows that EU exposure is only negatively impacting the operations of five of the corporates, while actually having a positive impact on four of the corporates.
The eurozone crisis, in isolation, is not considered by Fitch to be a major risk for the average rated Asian corporate. The 20 Asia-Pacific corporates identified as having meaningful eurozone exposure still evidenced aggregate sales exposure to their home region in 2011 of 52%, which was significantly higher than their exposure to the EU (18%) and the Americas (21%).
Moreover, the report demonstrates that currency movements, technology leadership and brand power are more significant in explaining revenue trends for the Asian corporates. This is illustrated by the diverging trend in EU revenue and earnings before interest and taxes (EBIT) generation between Japanese and Korean exporters, with the latter outperforming their rivals despite their higher revenue exposure to Europe.
Fitch believes a further deterioration of the eurozone crisis, including possible eurozone break-up scenarios where EU sales growth for Asia-Pacific corporates may return to negative territory, can be offset by sales growth in other parts of the globe, so long as the rest of the world remains out of recession. This is backed up by the fact that aggregate European revenue for the 20 most affected Asia-Pacific corporates represents only 18% of total revenues; and the fact that nine out of the 20 Asia-Pacific corporates actually recorded revenue growth in the EU since the eurozone crisis began in 2009, underlining a strong element of company-specific resilience to the crisis.
For each of the 20 Asia-Pacific corporates, the report provides details of the impact of the eurozone crisis on their operations and ratings, as well as their funding exposure to the EU.