Firms’ profits staying weak
BRITISH corporate profitability deteriorated to its weakest level in eight years during the second quarter of 2009, official data showed yesterday, driven by a fall in oil and gas companies’ profitability.
Figures from the Office for National Statistics (ONS) showed that the net rate of return by private non-financial corporations in the second quarter of 2009 was 11.6 per cent compared with a downwardly revised 12 per cent in first quarter.
And this may not mark the trough for corporate profitability, analysts said yesterday.
Howard Archer at IHS Global Insight said: “While the economy may well have returned to growth in the third quarter, recovery seems likely to be gradual and relapses could well occur. Consequently, profitability is likely to remain under significant pressure for some time to come.”
The fall in corporate profitability was down to declining profitability of oil and gas exploration and extraction companies. Their net rate of return fell to 33.6 per cent from 38.4 per cent in the first quarter. It had peaked at 73.8 per cent in the third quarter of 2008, boosted by high oil prices.
But firms in both the manufacturing and services sector saw their profitability improve in the second quarter. Manufacturing firms saw a net rate of return was 6.7 per cent in the second quarter, up on the 17-year low of 6.2 per cent they experienced in the first three months of 2009. The service sector’s profits improved to 15.6 per cent in the second quarter from a 15-year low of 13.6 per cent.