KUALA LUMPUR: Fitch Ratings has a neutral outlook on Asia-Pacific (APAC) corporates in 2025, reflecting the strength of their balance sheets and steady growth prospects, and largely offsetting global volatility and uncertainty over economic and geopolitical development.

In an APAC Corporates Outlook 2025 report released today, the credit rating agency said its projections include resilient credit fundamentals for many sectors, supported by robust domestic demand and lower input costs and commodity prices.

"Our forecasts include steady revenue rises over the coming years for most APAC sectors. The main negative outliers are oil and gas companies, largely mirroring our price deck developments and Chinese homebuilders," it said.

It expects the earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin of Fitch-rated corporates to increase further in 2025 to 15 per cent, from just above 14.5 per cent.

"The chemicals, diversified manufacturing and utilities sectors are likely to improve more, while we expect the real estate and oil and gas sectors to underperform," it said.

Fitch also anticipates capital expenditures (capex) requirements to differ by sector, with telecommunication's capex intensity to ease on 5G rollout, ultimately bolstering cash generation.

"We also expect a moderation in capex in chemicals and diversified manufacturing. Conversely, we project capex to increase in the oil and gas sector to finance refinery expansion and production growth; and in the utilities sector, to support the energy transition.

"This will help boost profitability as renewables generate higher margins than thermal power, but it will weigh on free cash flow," it said.

Fitch also has projected a general improvement in free cash flow generation in 2025 for APAC, to just below one per cent from around neutral in 2024.

"We believe share buybacks and M&A could resume in a few sectors, such as technology, as refinancing costs become more attractive. Such increases should translate to generally stable leverage metrics," it added.

 - BERNAMA