Firms slash their debts to strengthen balance sheets
Published 08/09/2011 | 05:00
With the euro crisis showing no signs of easing, all of the major non-financial Irish companies have been busy slashing their debts and strengthening their balance sheets.
The end of the era of abundant credit has hit heavily indebted companies hard. This lesson has not been lost on Irish-quoted companies, with the publication of their interim results showing that most of them had continued to reduce their borrowings.
In absolute terms, by far the biggest debt reduction was at CRH, which had net borrowings of €3.94bn at the end of June -- down more than €800m on the same time last year, and that was before the €574m that it will get from the sale of its stake in Portuguese cement manufacturer Secil.
Other Irish-quoted companies lopping large amounts off their borrowings included INM, which had borrowings of €452m at the end of June, down €91m on the same period last year. Paper and packaging group Smurfit Kappa has also been busy reducing its borrowings, recording a €290m reduction to €3bn over the past 12 months.
Meanwhile, having postponed orders for several new aircraft, Aer Lingus has added even further to its cash hoard, which increased from a net €240m to €353m.
The lesson of the current downturn is that heavily borrowed companies get hammered, while those with stronger balance sheets will ride out the storm. Based on interim results, that's a lesson most quoted companies have learned well.