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Firms’ profit outlook declines

Written by Max V. de Leon / Reporter
Tuesday, 13 January 2009 23:11
THE number of Philippine-based firms that expect to post increments in profitability, turnover, exports, selling prices and investments dropped considerably this year, according to a survey of global accountancy and advisory firm Grant Thornton International.

The survey, released here by Grant Thornton’s local partner Punongbayan & Araullo (P&A;), showed the percentage balance of the country in terms of profitability of Philippine privately held businesses (PHBs) dropped to 33 percent this year from 67 percent last year.

Percentage balance refers to the difference between the percentages of respondents who expect an increase and those who expect a decrease.

As for turnover expectations, the survey said the country’s percentage balance dipped to 37 percent from 61 percent in 2008.

Fewer companies also expect to raise selling prices, with the 2009 percentage balance going down to 39 percent from 66 percent last year.

The number of private companies looking to increase investments this year also went down. Only 30 percent expect to invest in new buildings compared with 49 percent last year, while 36 percent expect to invest in plant and machinery compared with 55 percent in 2008.

The survey noted that among the crucial indicators, it is in the area of exports where the Philippines has the best percentage balance, mainly because of the bullish outsourcing and offshoring sector.

“Surprisingly, export expectations only dipped 14 percentage points: from +45 percent to +31 percent,” the P&A; statement said.

“In the export industry, we expect certain sectors to fare better than others. The garments and electronics sectors will definitely suffer as the economies of their major markets contract. But other sectors, like business-process outsourcing [BPO], wellness, and other service industries are in a good position to remain resilient,” said Greg Navarro, P&A; managing partner and CEO.

Navarro noted that while expectations across these economic indicators are down, the country is still relatively optimistic compared with its neighbors. Thailand, he said, reported a negative balance for turnover, profitability and exports for the second year in a row.

Singapore, Hong Kong, China and Malaysia, on the other hand, all registered negative expectations for profitability this year, he added.

The Philippines, he said, is weathering the storm and local PHBs just need to focus on cost-cutting and productivity improvements, “take the slack time to train and retrain both management and employees, so they can emerge on the other side of this crisis stronger, better trained, more innovative, more competitive and more productive.”

“In RP’s case, the BPO industry reported late last year that it is on track to meet its full-year 2008 target of $6.8 billion, and outsourcing firms are continuously hiring workers. And while OFW remittances are expected to slow down this year, dollar remittances will still help fuel consumer spending, as the Bangko Sentral and government policies stimulate the market and encourage local banks to keep lending,” he added.

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