Aussie corporate financial health to worsen

SYDNEY, Nov 18 - The financial health of Australian companies has significantly worsened in the past year amid the global credit crisis, Fitch ratings said in a report, warning conditions could deteriorate yet further.

"The Australian corporate sector is heading for the weakest credit metrics since the early 1990s," Fitch wrote. It looked at levels of debt, cash flow and leverage ratios among others.

The dark corporate outlook follows an accelerating global slowdown. Just this week, Japan announced it had fallen into recession and Citigroup Inc <C.N>, the No. 2 U.S. bank said it would cut 52,000 jobs.

The report, which analysed financial reports of 2,675 listed firms on the Australian stock exchange dating back to 1992, highlighted two contrasting industry performances between materials/mining and financials.

Materials/mining companies had benefited from a resource boom while financial firms, including Allco Finance Group <AFG.AX>, were hit hard because of high leverage.

However, the strong performance from the materials/mining sector has now been reversed, leaving the entire corporate sector more vulnerable than at any time since 1992, Fitch said.

Australia's economy has slowed sharply this year and there are growing fears it could face a recession, putting an end to 17 years of uninterrupted growth.

Earlier in the month, the Reserve Bank of Australia cut its economic growth forecast for 2008 to 1.5 percent, down from 2.0 percent following the intensification of the global financial crisis.