Non-financial companies shot up their profit by 62.4% in the first quarter of 2022

Non-financial companies registered an increase of 70.5% in their net ordinary profit in the first quarter of the current year compared to the same period last year, a much higher increase than that registered in 2021 (8.1%). This is reflected in the information from the Central Balance Sheet Quarterly (CBT) published this Friday by the Bank of Spain, where it is evident that in the first three months of 2022 activity and corporate profits continued to recover.

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However, the net ordinary result of financial companies between January and March is still below (25.6%) the level prior to the pandemic. The increase in ordinary profits translated into an increase in the average profitability ratios. Specifically, the ordinary return on assets grew five tenths, to 2.1%, and the return on equity increased 1 percentage point and stood at 2.6%.

Financial income increased by 53% until March, as a result, above all, of the higher dividends received (which grew by 74%), although the interest received also increased, by 30.1%. For its part, financial expenses grew by 8%, due to greater indebtedness and despite the decrease in the average costs of outstanding debt of companies.

On the other hand, the debt of all the companies in this sample grew by 2.5% in the first three months of 2022 compared to a year earlier, which led to a slight rise (0.6 percentage points) in the average ratio of indebtedness in relation to assets, reaching 45.3%. In contrast, the average ratio of debt to surplus, which approximates the repayment capacity, fell, favored by the recovery of corporate profits.

The increase in ordinary surpluses also made it easier for the average weight of interest payments on results to continue to fall, although at a lower rate than the previous year, due to the rise in financial expenses associated with higher debts. This article includes a box that analyzes the evolution during the last year of the margins in the CBT companies, a relevant issue in the current context of strong cost increases. The median company in the sample would have experienced hardly any changes in its margins.

However, there is high heterogeneity not only between sectors, but also within each sector. The differences in the evolution of this variable are explained by certain characteristics, such as, for example, the growth of costs, the financial situation of the companies or the dynamism of their activity.

Employment increased by 4.1%

Personnel expenses increased by 5.9% between January and March, in year-on-year terms, an evolution that has been driven both by the increase in effective average workforces and, to a lesser extent, by the rise in average remuneration, which grew 1.8%.

In particular, effective average employment increased by 4.1% in the first quarter of 2022, compared to the 2.7% drop a year earlier. In this way, the average workforce stood at levels similar to those of the same period in 2019.

According to the report, the growth in employment was registered both in the group of permanent workers, who increased by 4.1%, and in personnel with temporary contracts, who grew by 3.9%. In line with this positive evolution of employment, almost half of the companies, 49.5%, increased their effective workforce, 14 percentage points more than in the previous year.

The increases in employment were especially concentrated in the commerce and hospitality sectors and in the so-called 'rest of activities', with rates of 7.1% and 4.2%, respectively. This could be linked to the fact that the progressive elimination of the restrictions imposed by the COVID-19 pandemic, compared to a year earlier, would have particularly benefited these sectors. In the opposite direction, the energy and industry branches reflected slight decreases in their average headcount, of 0.2% and 0.3%, respectively.

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