Rated non-financial companies (NFCs) based in Europe, the Middle East and Africa (EMEA) have cash holdings of almost €1 trillion to help them withstand economic uncertainties – most pressingly, the Brexit for which the UK voted on 23 June, according to Moody’s.
In a new report, the ratings agency says that corporate cash reserves in EMEA stood at €921bn in December 2015 – up a comfortable 5% on the €881bn recorded for the previous year.
The economic area’s top four business sectors – energy, utilities, telecoms and automotive – held around 59% of total reserves in December 2015, while 25% was retained by the top 10 cash-holding firms.
Companies appearing in that list include Electricite de France, Royal Dutch Shell, Volkswagen, Total SA and BP. As of December 2015, holdings retained by those 10 firms amounted to €232bn.
Report author Richard Morawetz – group credit officer for Moody’s Corporate Finance Group – said: “Despite the prolonged slump in commodity prices, liquidity remains solid overall for EMEA-rated NFCs, and is supported by the high aggregate cash pile.
“These corporates’ strong liquidity profiles provide an additional buffer against potential market uncertainties following the Brexit vote.”
Compared with EMEA, Morawetz pointed out, cash holdings in the US during the same period were far more concentrated in the technology sector.
“The US’s top five cash holders in 2015,” he noted, “were all technology companies like Apple and Microsoft. The technology sector made up 46% of the cash holdings of US NFCs rated by Moody’s.”
He added: “In EMEA, the sector was not represented in the top 10 companies and made up less than 2% of aggregate corporate cash holdings.”
Moody’s found that last year the US also had a higher share of cash held at investment-grade firms: 87%, compared with 74% in EMEA.
Another significant difference was that while EMEA’s top 10 cash holders accounted for a quarter of all holdings, while the 10 biggest US holders retained about 40% of $1.68 trillion.
According to Moody’s, that again reflects the substantial sums of cash held at tech firms, which dominate the US’s top five – holding more than three times as much cash as their EMEA counterparts.