Large Companies Expect Less and Less Profit

Large companies do not expect sales and profit growth this year. Companies have been expecting declining profits for more than a year, which has now reached a negative record, and the expected change in sales is also negative, according to the K&H large company growth index sent to MTI on Tuesday.

On average, companies expect profits to fall by almost 5% and sales by 0.5% this year. The weaker financial results are also holding back planned investment sharply, with only 37% of firms planning to invest in improvements this year, the lowest in 1.5 years.

The K&H Large Business Growth Index examines quarterly the expectations for the next year of companies with revenues above HUF 2 billion.

“The 0.5% revenue decline expected in the last quarter of 2022 is a slight improvement from the previous quarter's low of minus 1.8%. The moderate easing is due to the fact that those who had previously expected revenue growth or decline now expect revenue to remain flat (73%). However, this indicator has not been negative for two consecutive quarters, even in the first year of the coronavirus epidemic," the head of K&H's Corporate Clients division Gábor Rajna said, explaining the survey results.

The outlook worsens in line with the size of the company's annual turnover: companies with annual turnover between HUF 2-3.9 billion expect only a minimal increase (0.5%), while companies with annual turnover between HUF 4-9.9 billion and over HUF 10 billion are expected to see lower revenues this year (minus 0.8% and minus 2.6% respectively).

The picture for domestic and foreign markets is somewhat mixed. While the export market has fallen from minus 0.8 to minus 1%, the expected fall in turnover on the domestic market has been reduced from minus 1.9 to minus 0.6% compared with the previous quarter. The trend in domestic sales is therefore slightly more positive. According to Gábor Rajna, last year, firms were still able to incorporate higher energy and raw material costs into sales prices, but this year it is questionable how much this will be feasible. The decline in real wages is leading to a fall in retail sales, so the expected decline in revenues could even fall further in the coming quarters, he added.