Taiwan’s largest corporations are set for another profitable year as global capacity constraints and supply shortages linger, Taiwan Ratings Corp (中華信評) said yesterday.
Over the next few quarters, most companies would be able to tackle increasing business and financial risks caused by weakening operating conditions, the local arm of Standard & Poor’s (S&P) Global Ratings said.
“We expect profitability in most sectors to remain above mid-cycle levels, down moderately from record highs last year,” Taiwan Ratings credit analyst David Hsu (許立德) told an online news conference.
Photo: CNA
High commodity prices, rising inventory levels and flagging demand pose downside risks next year, but migration to new technologies including 5G, cloud computing, electric vehicles and Internet of Things applications, could help offset the pain, Hsu said
Tech firms would continue to lead the pack in terms of profitability this year, supported by capacity constraints for critical components, the company said.
Strong profits last year entrenched their balance sheets and gave them more resilience against headwinds, Hsu said.
However, profit outlook for tech firms over the next 12 months is cloudy as end-market demand for consumer electronics weakens and inventory levels rise, Hsu said.
Credit quality also improved in the chemical, transportation and technology sectors last year, he said, adding that prudent and enhanced capital structures lent support to corporate credit quality.
Relatively high levels of earnings before interest, taxes, depreciation and amortization (EBITDA) tamed the effects of rising capital expenditure on debt, Hsu said.
“We believe overall debt will increase this year, but debt-to-EBITDA ratios would post positive developments in most sectors,” he said.
Taiwanese corporations would have to grapple with ongoing risks such as high energy and raw material prices, higher borrowing costs, reduced access to financing, China’s “zero COVID-19” policy and geopolitical conflicts, Taiwan Ratings said.
At the same time, they have to prepare for possible natural disasters and intensifying policy demands linked to climate change, it said.
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