Bank of Spain says margins for half of companies have increased

About half of companies experienced in the first quarter of 2021 and the same period of 2022 an increase in your sales marginsand the other half, a decrease, according to the report Recent evolution of trade marginsprepared by the Bank of Spain.

More specifically, in certain sectors, such as the sale of electricity and that of mineral and metallic products, predominate drop in marginwhile, on the contrary, in other branches, such as coking and refining, increases predominate.

According to the report, in the electricity marketing sector and in the mineral and metal products sector, the selling prices of the medium-sized company would have grown well below unit production costswhich would have led to the contraction of margins.

In the opposite situation is the coking and refining sector, in which the average growth in selling prices would have exceeded the unit cost of productionwhich would have led to a widening of the margin of the medium-sized company.

In recent quarters, most companies experienced significant increases production costs due to bottlenecks in global production and supply chains and rising prices for many raw materials, including energy.

Companies that were unable to pass on this increase in costs to sales prices may have suffered a contraction in their commercial margins, understood as the ratio between their surpluses and net turnover. In any case, the evolution of corporate margins it may also have been conditioned by other factors, such as the growth of economic activity.

Costs are rising and margins are shrinking

According to the results, the growth of unit production costs is associated with a decline in the commercial margin. “This suggests that companies that have seen their costs increase further they could not have transferred them completely to their customers,” the study states.

Similarly, the propensity of companies to export, approximated by the weight of exports in their turnover, also has a negative effect on the variation in margins.

Similarly, companies that left with a higher margin reduced it, this impact being quantitatively greater than the previous ones. “This effect could reflect the greater ability of firms which started from wider margins to absorb the increase in costs through a reduction in margins”, explains the Bank of Spain in its report.

On the contrary, we see that companies that have seen their business develop furtherapproximated by the evolution of employment, have increased their margins.

Finally, companies whose financial situation is more vulnerable, approached by a high level of indebtedness and a lower capacity to cover your financial costs with the income generated, also showed an increase in their margins. This last result could be linked to the need for these companies to improve their profitability and therefore their net cash flows, given the financial pressure to which they are subject.

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