SA manufacturing to face pressure

The agency notes that credit profiles for manufacturers are expected to come under increasing pressure over the next 18 months, and that a recovery in market conditions is not expected prior to 2011.

Recently published statistics confirmed that manufacturing output has significantly declined by 15% y-o-y in February 2009.

Fitch notes that the declining output, combined with lower-than-expected GDP growth figures and tough trading conditions in South Africa's main export markets, does not bode well for the local manufacturing sector.

"When you combine the negative trends in published manufacturing data and GDP forecasts with the expected adverse impact on manufacturers' credit metrics, most notably leverage and cash flow generation, further corporate downgrades seem probable in the short-to medium- term," says Raymond Hill, head of Fitch's Emerging Markets Corporate team.

Fitch notes in the report that auto component and new vehicle manufacturers are considered most at risk, followed by manufacturers of iron and steel, metal products, machinery and durable consumer goods.

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