OREANDA-NEWS. The recent downward cash flow trend for Latin American Corporates is likely to continue, according to a new Fitch Ratings report.

'Weakness in cash flow metrics have been on a downward trend for Investment Grade and Speculative Grade issuers across Latin America the last four years with little relief in sight,' said Phillip Wrenn, an Associate Director at Fitch. 'Capex is being cut dramatically across the region, which has improved the FCF generation in the investment-grade categories and has reduced the negative ratio in the high-yield categories.'

In its new report, Fitch analyzed 93 investment grade issuers and 85 speculative grade issuers across five cash flow metrics, growth in funds from operations (FFO), growth in cash flow from operations (CFFO), growth in free cash flow (FCF) and growth in revenues, as well as EBITDA margin expansion. Only 22% of the 93 investment grade companies analyzed exhibited year-over-year improvement in cash flow metrics across either four out of five or all five criteria in 2014 compared to 38% of the investment-grade portfolio in 2011. Among the 22 issuers that had sharp upward trends, four have been upgraded in the past year: BRF, Braskem, Sigma and TGI.

Similar to the investment-grade issuers, approximately 32% of the speculative-grade credits analyzed were four- and five-star performers in 2014 vs. 38% in 2011. Among these issuers, 21 were rated in the 'BB' category. Of the 25 issuers that showed broad-based cash flow improvement, six were upgraded during the past 12 months: Cemex, Cementos de Chihuahua, InRetail Real Estate, JBS, Marfrig and Suzano.