The companies that register the highest revenues in Spain year after year have shot up the margins on their sales during the first half of 2023, thus managing to reach maximums in the historical series. This is shown by the latest data published by the Tax Agency, included in turn in the Observatory of Business Margins launched jointly a month ago by the Ministries of Finance and Economy and by the Bank of Spain. According to the figures, the ratio between the gross operating profit of large companies and their sales stood at 13.7% until the second quarter of the year, seven tenths more than the ratio reached in the whole of the year 2022, which It was already the best in the series.
These levels, explain sources close to the observatory, seem to suggest that the year 2023 will once again be a record for the country’s large companies, which are those that traditionally have the highest turnover.
The data from the Tax Agency is based mainly on VAT returns and withholdings for work income, which is why they leave out sectors of great weight in Spain such as the financial sector, which is not taxed by the consumption tax par excellence. The monitor also uses information from corporate tax, although this has a certain time lag, so it could not be used for the X-ray of recent months.
In turn, the agency makes it possible to differentiate between income quintiles, which gives rise to comparisons between the strongest and weakest companies in the country to see how the energy and price crisis has affected each one. It is at this point where you can see the differences between the companies with the highest and lowest billing.
According to the figures, the sales margins for the organizations with the highest turnover – that is, the last quintile – have traditionally moved between 10% and 11%. However, in 2022, in the midst of the inflationary crisis, they rose to 13% and today they are at 13.7%. On the other side are the rest of the groups analyzed, whose current margins are around the historical average –this is the case of the fourth quintile, with a current ratio of 10.7%– or are well below it –as occurs in the first three quintiles–. The most striking case is that of the companies with the lowest turnover, whose margin is negative 101.9%.
It should be remembered that the increase in business margins does not necessarily represent an upward trend in the profits of organizations. The indicator is useful to analyze other variables and, for example, to know if the increase is due to the optimization of resources by the company; to external factors, such as the increase in interest rates; or to a transfer to goods and services of the increase in production costs.
In the case analysed, as explained by the observatory’s methodology, the margins on sales and the increase registered in large companies seem to show that there has been a transfer of costs to final sales prices in this group of companies. In these situations, in which there is elasticity and adjusted price setting processes, it might be expected that the trend will reverse once the situation is reversed, that is, when the inflationary crisis abates.
The data from the Tax Agency are based on a sample of just over half a million companies, which is divided into five equal parts based on turnover to obtain the income quintiles. However, the statistics also offer a more precise x-ray by sector, although in this case without differentiating by levels of turnover.
From here, one of the groups that presents the best margins on sales is the supply of electricity, gas, steam and air conditioning, made up of some 11,500 companies. Specifically, its sales margins reached a ratio of 28.4% in the second quarter of 2023, some 10 percentage points more than what it registered before the outbreak of the coronavirus pandemic.
Another of those that have recovered margins over the last few quarters is food. In this case, the sales indicator stands at 12.3%, which means greatly improving the falls recorded in 2022 (with a margin of 5.7%), when the price crisis began. The figure, however, is still somewhat below the ratio that the sector achieved in the midst of the pandemic, when it reached a maximum of 13%.
The statistics also allow us to see other additional variables, such as the weight represented by the wage bill of each company over total sales. In the case of companies with the highest revenue, the ratio stands at 9.7% at the end of the second quarter of 2023, one of the lowest figures in the historical series. In contrast, in the rest of the quintiles, the weight of salaries is growing little by little.
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