Many CAC40 companies are financially unhealthy

It is sad to notice that many of the top French companies are financially unhealthy just several months into the crisis and that it's not only banks which are in deep trouble but also other sectors like Commodities, Energy, Food & Beverages...

Remembering that during the past several years all the same companies were showing record profits quarter after quarter just to see them raise money on the markets now is quite telling.

All the profits have vanished now, most of them wasted on high executive compensation and shares buy-backs at record equity valuation and all that remain is the debt that needs to be serviced and the various costs of running the company in a difficult economic environment.

It is also probably the right time to question the work done by the executives and assessment their vision and competences and ability to run the companies.

Also note that the money is badly needed given the yields that the bonds offer (typically 8 to 10% !) in the current low interest rate environment.

Here's the list that I quickly gathered from the CAC40 index in France.
  • Danone raised 3 billion € by selling equity
  • Pernod Ricard raised 800 M€ buy selling bonds
  • Saint Gobin has raised 1.5 billion €
  • Lafarge has raised 1.5 billion € in shares and 1.4 billion € in bonds
  • ArcelorMittal has raised 3.2 billion € in shares and 5 billion € in bonds
  • Suez Environment has raised 1.8 billion € in bonds
  • EDF 5.0 billion € in bonds
  • GDF Suez 4 billion € in bonds
  • Société Générale has sold a 7.2% stake to the French government
  • Probably several more that I missed, notably banks...
I am sure France is not the only country affected by this behaviour and that Mid- and Small cap are probably in the same bag, as confirmed by the CGGVeritas example: the company just borrowed 350 M€ at 9.5% (or 10 1/8 depending on the source).

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