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Businesses' Profit Outlook Better Than Most

6 December 2004

New Zealand Businesses' Profit Outlook Better Than Most

New Zealand businesses are among the most bullish in the world about profitability in the coming year, according to a fresh international survey.

The Grant Thornton international business owners survey (IBOS), which surveyed New Zealand firms alongside other countries for the first time last year, has this time shown New Zealand more optimistic about profit than in 2003. New Zealand firms are second only to India in their profitability outlook.

Overall, business owners in India for the second year head the optimism / pessimism balance among the 24 countries surveyed with a score of +88%. South Africa, Ireland, Australia and Canada also remain very optimistic overall, with New Zealand tucked in just below them in the global league table on +64%, well ahead of the global average.

But when it comes to their feelings specifically about future profitability, New Zealand business owners have more hope than their Australian counterparts. Companies in India topped the optimism / pessimism balance in this category with a score of +75%, New Zealand companies followed, with +62% (up from+55% last year), and Australian firms came out at +57%.

Not surprisingly, New Zealand companies surveyed also had favourable expectations on increasing turnover and selling prices.

The Grant Thornton International Business Owners Survey was carried out among more than 6,300 owners of medium-sized businesses during September-October. Figures are the percentage balance between optimistic and pessimistic responses.

Grant Thornton New Zealand chairman Peter Sherwin commented: "Given that there has been a significant increase in general optimism about the economy on a worldwide basis, it is very encouraging to see New Zealand right up there when measured against others. The fact that New Zealand is so high on the profitability outlook scale is particularly pleasing.

"India is something of a phenomenon at this time, with business sentiment at an all-time high, foreign investment growing and the sharemarket index at a record level. Outside of India, New Zealand is the best of the rest when it comes to having an optimistic outlook on profitability, so it is no surprise that the New Zealand stockmarket is performing well."

Mr Sherwin said the value of being measured alongside other countries' businesses had been shown last year when New Zealand was included in the survey for the first time. Having a year-to-year comparison now for the first time was equally worthwhile.

Apart from the overall optimism / pessimism balance, the survey specifically charted companies' expectations on profit, exports, employment, investment in buildings and investment in plant and machinery. It also this year looked especially at whether terrorism had made an impact on firms' optimism.

Outside of their outlook on profits, New Zealand businesses were most optimistic about employment, showing an optimism / pessimism balance of +41% (last year +31%) ? not as good as Australia with +52%.

New Zealand was mid-field among the companies surveyed when it came to outlook for investment in buildings as well as plant and machinery.

On exports, it was trailed by only seven other countries, but half of the businesses surveyed in New Zealand were not exporters. New Zealand had an optimism / pessimism balance figure of only +17% in terms of its expectations for exports, while Australia recorded +32%.

Along with countries such as India, Singapore and Ireland, in New Zealand the threat of terrorism was only a minor factor in generating pessimism.

ENDS

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