While firms’ total turnover overshadowed boom-time levels two years ago, gross profit followed suit only in third quarter 2013.
Company gross profits outgrow boom times
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Business sector third quarter gross profit amounted to €945m, shows Statistical Office database. For the very first time, this flies above the €921m of second quarter, 2007.
Peak turnover of business sector (€10.9bn in fourth quarter 2007) was beaten in fourth quarter of 2011 already, crossing the €11bn barrier.
This year, third quarter total turnover of companies rose to €12.9bn – an historic high, 1.6 per cent improvement from previous quarter and a 9.5 per cent leap year-on-year.
In this third quarter, gross company profits improved on most areas of business. The largest input into the overall result came from trade, real estate and energy companies mainly operating domestically.
Processing industry profits, weightiest in business sector gross profits – in decline since fourth quarter of 2012 – again went into growth, increasing 4 per cent year-on-year, first and foremost by the improvement in the exports oriented timber and electronics industry growth.
According to Swedbank senior economist Tõnu Mertsina, companies profit growth was, for the third quarter running, substantially hampered by decline of profits in transport companies – a chief brake on GDP growth. For more than a year, profits have also decreased in information and communication technology, and professional and technical business.
«Even though all-time high was achieved by company profits in third quarter, the percentage profits of sales income i.e. profitability was still lower than before the economic crisis. Company profitability has been in a decline since last quarter of 2012, already,» explained Mr Mertsina.
As assessed by SEB economist Ruta Arumäe, the return to growth in profits is a good sign regarding the direction of the economy. «Also, this again increases companies’ options to invest; this indeed had already improved from the first half of the year, in third quarter improving by 14 per cent year-on-year. This, also, is a positive sign regarding future outlook.»