Total collective revenue for our top 200 corporates was down tad under two percent to $147.5 billion. Profits before tax, however, were up 37 percent, clawing back part of the big hit our largest companies took on their collective bottom lines in 2009 when pre-tax profits plummeted 51 percent. This shows that our biggest enterprises still have way to go to recover from the GFC which plunged the world into recessionary spiral. EBITDA was up 8.1 percent for the year.
The Top 200 companies also contributed more to the government coffers – with tax paid up 150 percent from $1.3 billion to $3.28 billion. This meant total after-tax profit was down marginally by 0.6 percent. Tax changes were significant factor in this, and included substantial deferred taxation provisions by companies with balance dates after May 2010, resulting from the Budget’s abolition of building depreciation allowances.
Despite the challenges of domestic economy struggling to recover, there are signs that the organisational shakeout induced by the global financial crisis has at least some of our largest businesses refocusing their strategies to become more innovative and efficient.
Bigger companies have generally weathered the storm better than the small business sector which generates its revenue predominantly from domestic markets such as retail and building. These businesses are often financed off household balance sheets and don’t have the same capital or resources to battle through tough times when cash flow is tight.
Evidence of this reality is also reflected in the performance of the larger companies within the top 200. This year the top 50 of our 200 companies generated 70 percent of the revenue and 86 percent of the profits. They also own 67 percent of the assets. Last year they generated the same revenue percentage but earned only 66 percent of the profits on 64 percent of the assets. The bottom 150 companies have, therefore, been affected more heavily by the downturn.
The country’s largest and most profitable business, dairy giant Fonterra, made the most of strong international commodity prices and lifted its revenue healthy 4.5 percent to pass the $17 billion mark. It also generated an additional $75 million in profits to nudge within $15 million of the $700 million mark.
A number of other larger companies are also now performing better on the global stage, according to one of the Top 200 judges Neil Paviour-Smith, managing director of Forsyth Barr. “They are generating the bulk of their income offshore and growing strongly in markets that, in some cases, have been under the same sort of economic pressure as New Zealand.”
There has also been noticeable shift in the whole concept of “exporting”. Major commodity exporters such as Fonterra, kiwifruit marketer Zespri and the meat companies will obviously continue to process most of their products in New Zealand, but the model is changing for growing number of New Zealand companies which are moving to manufacture more offshore. They retain head offices, undertake research, product development, marketing and design in New Zealand but manufacture in countries where they can source the most competitive price to the best quality. Sadly, this is often no longer in New Zealand.
A new breed of “intellectual” exporters is also earning valuable foreign exchange by selling their talent and expertise internationally. One of their leaders is home grown engineering consultancy Beca, winner of this year’s Deloitte/Management magazine Top 200 Company of the Year Award.
Extracts from comprehensive overview of the performance of New Zealand’s largest business organisations are featured in NZ Management’s December issue.
