Corporations’ return on assets increases to 6.5% in Q2
Bank of Portugal shows a reversal in the downward trend, driven by the manufacturing sector, but national companies are still less profitable than before the pandemic.
Corporations’ return on assets rose to 6.5% in the second quarter of this year, marking the start of the recovery in this indicator, interrupting a cycle of five consecutive quarters of decline.
According to data published on Tuesday by the Bank of Portugal, Portuguese companies are still at levels lower than in the pre-pandemic period. In the last quarter of 2019, the return on assets was 7.6%.
The analysis by economic activity sector of private corporations shows that, compared to the first three months of the year, the return on assets – ratio between earnings before interest, taxes, depreciation and amortisation (EBITDA) and total assets – only decreased for the electricity sector corporations, from 7.8% to 7.5%.
The profitability of the manufacturing sector (10.7%) continued to outperform most sectors of activity, with transport and storage (8%) and trade (7.4) also making good contributions. On the opposite side, the profitability of the construction sector (5.0%) and head offices (4.8%) remained the lowest in the sectors under analysis.
According to INE’s listing for “head offices” (CAE 70100), it covers “the supervision and management of other units of the group or enterprise, particularly in the areas of strategic and organisational planning and decision-making”. It includes, for example, the providing of administrative services to group companies, excluding the activities of holding companies (SGPS) not involved in management.
The profitability of public companies was -5% in the second quarter. In the private sector, excluding head offices from the analysis, the Bank of Portugal noted that the increase in profitability was superior for large companies than for SMEs (from 7.9% and 5.5% to 9.3% and 6.1%, respectively).
