30 Jun 2020
Posted in Business Fundamentals
APAC companies dominate 2019 global profit pool, reveals GlobalData
The Asia-Pacific (APAC) region dominated the global profit pool landscape with a share of 37.9% in 2019, according to a new study by GlobalData, a leading data and analytics company.
The study, based on a sample size of about 40,000 global public companies across a number of sectors, analyzed the sectorial and geographical net profitability levels in 2019 vs. 2015.
The profitability share of the companies headquartered in the APAC stood at 37.9%, which amounts to US$1.68 trillion of an estimated global profit pool of US$4.5 trillion. This was followed by North America (33.5%), Europe (22.8%), South and Central America (3%), and the Middle East and Africa (2.7%) in 2019.
APAC was home to 57.4% of the companies in the sample size, followed by North America (17.3%), Europe (17%), Middle East and Africa (5.4%), and South and Central America (3%).
Although the APAC was ahead in the total profitability contribution and number of companies, it was trailing behind North America, Europe, and even South and Central America in terms of profits per company ratio. North America reported profits of US$219.1m per company, followed by Europe (US$151.1m), South and Central America (US$115.1m), APAC (US$74.5m), and Middle East and Africa (US$56.6m).
The top 10 sectors covered by GlobalData accounted for about 77% of the global net profit pool in 2019, led by banking and payments (21.2%), technology and communication (12.4%), construction (9%), oil and gas (8%), insurance (7.3%), consumer (5.8%), pharmaceuticals and healthcare (4.2%), retailing (3.3%), automotive (3.3), and metals and mining (2.6%).
Apart from automotive, all the sectors reported compounded annual growth rate (CAGR) over the past five years, with oil and gas, and metals and mining reporting exceptional growths.
Oil and gas registered 5-year CAGR of 71.7% in 2019. According to the EIA, Crude oil prices ended 2015 with below US$40 per barrel, the lowest level since early 2009; whereas the prices averaged US$64 per barrel in 2019. The price increase was one of the factors that led to substantial increase in net profits.
In 2015, mining reported loss of US$84.9bn as there were persistent declines in commodity demand and prices, and curtailed exploration spending.
Parth Vala, Company Profiles Analyst at GlobalData, comments: “As recovery started in 2017, there was expansion in the production capacities to meet the increased demand and consistent rise in the commodity prices. The sector came back to profits, which were stable in 2019.”
The 10 sectors accounted for 89.9% of the net profit pool of the Middle East and Africa, followed by the APAC (80.7%), South and Central America (78.4%), Europe (74.3%), and North America (73.4%). Global profit pool is expected to be greatly impacted and shrink significantly in 2020 as the global economy has been pushed into recession by the unprecedented crisis of COVID-19. In light of the uncertain business prospects, to stay afloat, corporations across the globe have been forced to cut costs in lieu of substantial decline in demand.