Results of non-financial corporations in 2022 Q1

The Central Balance Sheet Data Office Quarterly Survey (CBQ) data show that corporate earnings and activity continued to recover in 2022 Q1. Against this background, average profitability levels increased relative to the same period in 2021, but remained below pre-pandemic values. The debt of the sample firms taken as a whole grew in 2022 Q1 compared with a year earlier, leading to a slightly higher average debt-to-asset ratio. Conversely, the average ratio of debt to ordinary earnings, which proxies repayment capacity, fell, helped by the recovery in earnings. The increase in ordinary profit also enabled the average interest coverage ratio to continue to decline, albeit at a slower pace than in 2021 on account of the rise in financial costs associated with the higher debt. This article includes a box analysing changes in the profit margins of the CBQ firms during the last year, an important question in the current setting of sharp cost increases. For the median firm in the sample, the profit margin has remained virtually unchanged. However, there is a high level of heterogeneity, not only across sectors, but also within each sector. The differences in the course of this variable are attributable to certain characteristics, such as the growth in costs, firms' financial position and the buoyancy of their activity.