Business profitability, exports, turnover seen to drop this year

Local business leaders said profitability, exports and turnovers will drop this year as the country feels the full effects of the global financial crisis, a report said yesterday.

According to the report released by Punongbayan & Araullo (P&A), the expectations for six economic indicators namely profitability, turnover, exports, selling prices, investment in new buildings, and investment in plant & machinery went down.

“While expectations across these economic indicators are down for Filipino business leaders, it is worth noting that we’re still relatively optimistic compared to our neighbors,” Greg Navarro, P&A managing partner and CEO said.

“Thailand, for example, reported a negative balance for turnover, profitability and exports for the second year in a row. Singapore, Hong Kong, Mainland China and Malaysia all registered negative expectations for profitability this year,” he noted.

The International Business Report (IBR) surveyed over 7,200 local privately held businesses (PHBs) on their expectations for six economic indicators.

“Local PHBs just need to focus on cost-cutting and productivity improvements, take the slack time to train and re-train both management and employees, so that they can emerge on the other side of this crisis stronger, better trained, more innovative, more competitive and more productive,” Navarro said.

Across all indicators, PHBs anticipate weaker increases for the coming year, with profitability showing the biggest drop to only 33 percent this year from 67 percent a year ago.

Turnover expectations is now at 37 percent from 61 percent. Surprisingly, export expectations only dipped 14 percentage points to 31 percent from 45 percent.

“In the export industry, we expect certain sectors to fare better than others,” Navarro said. “The garments and electronics sectors will definitely suffer as the economies of their major markets contract. But other sectors, like business process outsourcing, wellness, and other service industries are in a good position to remain resilient,” he added.

Garment companies based in economic zones retrenched workers late last year as demand dropped despite the anticipated holiday spending. Peninsula Fashion International Corp., the eighth biggest exporter in Clark Freeport, retrenched 400 workers, while Limech laid off 541 employees and closed its newest factory.