Industry profits fell 34% through September due to oil companies | Economy

Corporate profits continue to grow, but at a slower pace than last year and with wide heterogeneity across sectors. This is confirmed by the Bank of Spain in its latest report Central balancepublished this Wednesday. The data reflects the health of the business as a whole up to the third quarter of this year, a period during which its net ordinary result increased by 0.7%, much lower than the 13.1% recorded at the same dates in the year. Trade, hospitality and transport were the main drivers of activity, boosted by a record summer for tourism. Industry collapsed, with profits falling more than 34%, helped by poor performance from oil companies, which suffered a 68.9% collapse due to falling oil and energy commodity prices, although most industrial sectors recorded negative rates. Energy companies, which declined by 4.7% over the period, also did not perform well; In the information and communications sector the decline was 18.1%.

The Spanish financial supervisor’s sample includes approximately 620,000 companies, most of which are medium and small. Net ordinary result is a value similar to the profit that companies earn in their regular activities, excluding extraordinary ones. Despite the collapse of the industrial sector (including due to composition effects, since the weight of the oil subsector is important in the sample), most companies showed positive dynamics: 53.6% of the sample recorded an increase in net ordinary results. in the first three quarters of the year. 0.4% maintained their results compared to last year, while the remaining 46% of companies worsened their results. A 2% increase in gross value added (GVA) – that is, the value of all products and services after deducting production costs – and a 22% increase contributed 4% to financial income. Personnel costs and financial costs, on the other hand, had a more negative contribution than in the previous year.

The slowdown in corporate profit growth comes at a time when the Spanish economy is growing strongly, especially compared to other major European economies. While they are experiencing emotional growth – and forecasts do not indicate a change in direction – Spain’s GDP has grown for five consecutive quarters, increasing at a rate of 0.7% or higher. The latest data from the National Statistics Institute (INE) forecast growth of 0.8% between July and September. On an annualized basis, the Spanish economy recovered by 3.4%, double the OECD (Organization for Economic Co-operation and Development) average, and the Bank of Spain itself revised upward its forecasts for the end of this fiscal year. 2.8% is a figure that is particularly driven by consumption, tourism, an increase in the number of migrants and exports.

Despite a slight improvement on the group’s usual result, turnover fell 2.4% in the first three quarters of this year – a figure that is at least lower than the 7.9% fall recorded in the same period in 2023. . Also in this case, an important influence is exerted by the industrial sector, especially the energy sector, which has a high weight in the sample and is the only one whose turnover decreased during the analyzed period, recording a resounding decline of 19.3%, caused by the fall in energy prices compared to 2022 , when the Russian invasion of Ukraine caused stress in the gas and electricity markets. In fact, most companies improve their sales: this applies to more than 60% of firms.

The return on assets ratio, in turn, remained stable. It was 5.5% between January and September, similar to the 5.6% recorded over the same period in 2023. And again the target is on the industry in general and oil companies in particular. “This downward trend is observed only in the industrial sector, as the rest of the sectors have seen an increase in profitability. If we exclude the oil refining industry, the industry will also see slight growth. This slightly positive behavior would also be reflected in the overall sample if we excluded the specified subsector,” the executive explains in a note.

Already in 2023, there was a slowdown in business profit growth. The Bank of Spain confirms that the net ordinary result increased by 7.5% last year, compared with the 38.9% achieved in 2022. This data is collected in Annual monograph of the central balance sheet 2023also published this Wednesday. The fall in selling prices in industries related to energy and fuel also left its mark in this case, driving turnover into the negative zone – it fell by 0.7%. On the contrary, asset profitability improved compared to the previous year, reaching values ​​above pre-pandemic levels for the first time.