Companies expect sales and profit to fall

More than half of all businesses expect the global economic downturn underway will continue to put pressure on sales and profits in 2009, a survey says.

A Dun & Bradstreet (D&B) business expectations survey found 58% of executives expect profits to fall in the March quarter of 2009.

Moreover, 54% of respondents said they were preparing for a drop off in sales over the same period.

“The decline reflects the slowdown in consumer spending, which has been noticed by 28% of firms, and the poor results experienced in the first three quarters of 2008,” the report, released on Monday, said.

D&B said the there was hope among executives that the RBA’s actions would help promote spending but the size of recent cuts “indicates that the current downturn is likely to impact Australian businesses into 2009”.

Although recent falls at the pump has eased the impact of petrol prices, the cost of fuel remained at the forefront of executives’ minds, as did the volatile Australian dollar.

The report found 73% of executives said their businesses had been hurt by the local currency’s dramatic fall from 98.49 US cents in mid-July to about 60 US cents in late October, with wholesalers suffering the biggest impact.

The global liquidity crisis has also resulted in significant cash flow challenges for some businesses and forced many organisations to postpone growth plans as access to credit has dried up.

While economists believed the threat of inflation had receded and was now expected to fall, the survey found selling price pressures remained alive and well.

The survey’s measure of selling prices rose 17 index points to† 79 points – its highest reading in the history of the survey – with† 82% of firms expecting to raise prices, compared with 3% expecting a decrease.

Liquidation Direct has noticed a number of companies fail with dramatic fall in sales. Areas involving discretionary spending such as restaurants &†retailers are struggling with many companies entering into voluntary liquidation or voluntary administration.

There are real insolvency issues in the economy at present and directors need to understand their roles and responsibilities in difficult times.

Liquidation Direct operates a 24 hour insolvency advice line that is answered by an insolvency expert at all hours.

Call 1300 767 525 for free and confidential insolvency advice.