April 18, 2021

Spanish companies lubricate their machinery to the rhythm of recovery

Spanish companies lubricate their machinery to the rhythm of recovery


Despite the economic slowdown and external risks, large Spanish companies are in good health. Proof of this is its business results of 2018. In the face of adversity, the companies – the Ibex 35 in particular – grow and keep this ship that is Spain afloat. Only the bank has already released all its figures from last year but the trend is that in all sectors the road is clear. As an aperitif -and very juicy-, the financial entities of the national park increased in 3,053 million euros your benefit net in year-on-year terms, which represents an increase in 22.4%.

"We have been pretty good years. Until the third quarter, the average profit increase was around 60%. Since the economy began to recover, there has been a strong increase, greater than the one experienced in the years prior to the crisis, "explains Josep Bertrán, Head of Financial Programs at EAE Business School. Almudena Semur, secretary general of the Institute of Stock Market Studies, maintains that "companies have a solid financial situation. With data for the second quarter of 2018, they have recorded a financial surplus, which means that the undistributed profits have exceeded the investment. This surplus has been used as in previous years to reduce debt and the acquisition of financial assets. And it continues emphasizing the effort made by societies to reduce their indebtedness: using figures from the first half of last year, this remained in the 94.95% of GDP, "Well below the Eurozone average," recalls Semur. This, in addition, was put in value by the governor of the Bank of Spain, Pablo Hernández de Cos, in January before international investors, as a symptom of good health.

In spite of everything, the effort of the companies has been remarkable since the financial crisis began. Bertrán, of EAE, emphasizes that "one of the measures to overcome the crisis has been via containment, making strong adjustments". In other words, cost reduction, as in the case of labor, and thanks to economic recovery. According to data from the INE, labor costs grew in the third quarter of 2008 at an annual rate of 4.9%; a decade later they do it at 1.4%. This supposes 3.5 percentage points less increase in labor costs (where salaries are included). A strong containment of costs, despite the fact that salary costs have increased by 8.84% in ten years, while recorded inflation is 11.6% from September 2008 to the same month of 2018. Loss of purchasing power and moderation of labor costs … to make those of Spanish companies a reference worldwide. "Spain has international leadership companies in sectors such as textiles, communications and banking. The latest reports indicate that, after the efforts of these companies and the reforms that came with the crisis, there have been important productivity gains, "says Santiago Carbó, director of Financial Studies at Funcas.

The foreign sector pulls good business results and already represents 25% of Spain's GDP, compared to 17% 10 years agoLabor costs continue to grow, but companies have moderated their increase by 3.5 percentage points in a decade

Bertrán, for his part, points out that Spain has gained competitiveness at the cost of adjusting the belt in labor matters. And that has benefited an economy like the Spanish one so dependent on the foreign sector. In fact, exports already represent almost 25% of the country's GDP, when ten years ago its weight was 17%.

Even so, Spain is not exempt from risks, both external and internal. "Companies will have to assume higher costs if the budgets are approved", which will hinder their competitiveness and will have an impact on job creation, "says Semur of the IEE. At a foreign level, all experts point to the trade war between the United States and China and the Brexit as the main threats for business results. A shake on the other side of the pond or in the British islands could ruin the world, European, Spanish growth …

However, national companies maintain a differentiating element that makes them always be in the pools of all investors: dividends. At the end of 2018, according to a study by Allianz GI, Spanish companies were in the top positions in terms of profitability granted to shareholders. Specifically, Spain is the fourth country in Europe that distributes more juicy dividends with a 4.65%, only behind Portugal, United Kingdom and Italy. And this is not an isolated trend, but our country has always been in the top positions traditionally. As an example, Bankia: despite being still owned by the State, the good results have caused it to decide to increase 5% the dividend, while the previous year it did in a 7%.

Contribution to reservations

This, however, there is who sees it as a future weakness. Those with a more conservative profile recommend entities save for when they are badly given. This is the case of Bertrán, of EAE: "The only problem is that companies distribute all the benefits in the form of dividends, which means bread for today and hunger for tomorrow. If that were put in the form of reserves, it would be a cushion for when they come badly given. Some companies have been very happy in their dividend policy ». All this without forgetting the relationship of our country with Ibero-America. Ties more than narrow between both regions, but with the incipient risk of the last convulsions. As in the case of Venezuela or Argentina, always both under the shadow of doubt but now in a situation more worrying than ever because of the political and economic situation that each one is experiencing, according to Carbó, of Funcas.

The feeling, in short, is that Spain has emerged from the crisis and that companies have the key to continue growing. It is only necessary to forget that tendency of which the Funcas expert says that the "post-crisis drama" continues in force. Analysts encourage investors and the companies themselves to be alert, although, at the moment, all the pieces fit together. The flu, this year, will not make a dent in the Spanish entities.


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