|05 September, 2019

Cash balance of EMEA companies at nearly $1.21trln; Saudi Aramco tops the list

However, as of 30 June 2019, Saudi Aramco's reported cash balance fell to $39.5bln

US dollars. Image used for illustrative purposes.

US dollars. Image used for illustrative purposes.

Getty Images/Fitria Ramli

Rated non-financial companies in the Europe, Middle East and Africa (EMEA) region held nearly €1.1 trillion ($1.21 trillion) in total cash at the end of 2018, thanks to a significant increase in the cash holdings of the top 10 corporate companies worldwide, led by Saudi Aramco, in 2018.

The corporate cash pile of EMEA non-financial companies in 2018, according to a Moody’s Investor Service report, climbed 15 percent compared to €941 billion ($1040.4 billion) at the end of 2017. The ratio of cash to revenue, which is more comparable year-to-year, was at 14.2 percent in 2018, which was the average for the past seven years, the Moody's report noted.

The cash holdings of the top 10 companies worldwide leapt by 30 percent to €260 billion in 2018  with oil giant Saudi Aramco topping the list.

The world’s biggest oil producing company was the largest cash holder in the EMEA with €43 billion ($47.5 billion) in cash in 2018, triggering growth in the energy sector and lifting it as the largest for EMEA cash holdings to 21 percent in 2018.

The energy sector accounted for two-thirds of the cash holdings of the top 10 companies as global energy companies, such as Royal Dutch Shell, Gazprom, Eni and Rosneft, increased their cash holdings in 2018 versus 2017.

However, as of 30 June 2019, Saudi Aramco's reported cash balance fell to $39.5 billion (about €35 billion) after a step-up in dividend payments, narrowing the gap with the others in the top 10.

Saudi Aramco's inclusion resulted in Saudi Arabia's share of the total EMEA corporate cash tripling to 6 percent in 2018 from 2 percent in 2017 with a concurrent decline in most of the other top 10 countries’ shares.

For example, Germany, France and the UK - which traditionally account for the largest shares of cash because of the number of ratings and the scale of the companies - saw their aggregate share of cash fall to 48 percent in 2018 from 52 percent in 2017, the report noted.

The automotive, energy and pharmaceutical sectors have the highest average cash holdings per company, while metals and mining and retail are lower in the sample of sectors, although much of this reflects their relative scale.

According to the report, the share of cash held by investment-grade companies in EMEA has increased.

These companies increased their share of the total cash to 85 percent (€926 billion) in 2018, up from 82 percent (€774 billion) in 2017.

The factors that contributed to about half of the change in the overall cash holdings of investment-grade companies in EMEA include the inclusion of Saudi Aramco which added about €43 billion, and other nine of the top 10 cash holders, which all have investment-grade ratings, adding  €36 billion to their aggregate cash.

By contrast, the total cash of speculative-grade companies declined, and was partly attributable to the upgrade of four Russian companies to in February 2019, the report noted.

(Writing by Seban Scaria seban.scaria@refinitiv.com, editing by Anoop Menon)

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© ZAWYA 2019

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