On the brink of the abyss
As last week draw to a close and companies reported their results, signs became increasingly evident that the first half of this year was not much of a success. Many companies had to satisfy themselves with falling profits and some counted themselves lucky not to have had greater losses.
The reasons for the fall are obvious. The fall in domestic demand has been caused by growth tailing off, the strong złoty has hindered exports and tight monetary policies have put pressure on profits.
Many companies have reduced stocking levels, feeling it better to sell now while demand is still there, not considering that they could find themselves being in a position with nothing to sell.
Clearly a vicious circle is being created. Once demand falls, companies seek to limit their costs by reducing production, pay and employment. This is at a time when restructuring in many areas is not complete. To make matters worse investment has been hit by high interest rates and furthermore there is less willingness on the part of financial institutions to bankroll underperforming companies.
Only quoted companies have their results scrutinised but it is certain that their results will reflect the economy as a whole.
The recent fall of the Polish currency will be causing worry for those companies such as TPSA, Elektrim and Netia which have debts abroad.
Tomasz Stadnik, investment advisor at Credit Suisse believes that there will be an upturn in the fourth quarter which will coincide in a reduction in the value of the Polish currency.
This is not a recession. Yet.© ℗
Podpis: Alan Heath