Corporate financial performance saw improvements in the third quarter of 2023, according to a report by KPMG.
The KPMG Financial Performance Index (FPI) found a slight decline in the number of ‘zombie’ companies, which are organisations close to default (scoring 0 on the KPMG FPI for three or more consecutive quarters. However, an increase in the number of distressed companies suggests a prolonged and gradual recovery ahead.
The number of zombies fell 0.91% this quarter to 1300 from 1,312 in the second quarter. While this is a good sign, it is worth noting that – year-over-year – the number of zombies has more than doubled. Many of these companies may already be experiencing distress or working through restructuring strategies.
In the three-month period, the sectors with the highest proportion of zombies included Raw Materials (with 14.6% zombies), Biotechnology (12.6 percent), Technology and Telecommunication (6.9%) and Pharmaceuticals (6.3%).
Among the report's other key findings are:
- Corporate financial performance improved in the third quarter of 2023, with the average KPMG FPI score rising from 88.12 in 2Q23 to 90.62 in 3Q23 globally.
- South America continued to be the best-performing region with a KPMG FPI score of 92.61, followed by Asia at 92.08. Oceania reversed its downward trajectory after two quarters of large drops, with KPMG FPI rising from 65.51 to 74.51 q-o-q.
- Companies headquartered in Canada and Australia enjoyed the greatest increase in KPMG FPI scores, while Nigeria and Philippines saw the biggest declines, falling by 2.76 and 0.8 percent respectively. Australia reversed its previous quarter decline, rising 16.9 percent to 73.38 in 3Q23.
- Chemicals and Manufacturing remained the top performing sectors with FPI scores of 95.24 and 95.16 respectively, while Raw Materials and Natural Resources and Biotechnology returned the lowest FPI scores, with Raw Materials falling 1 percent to 86.07 over the quarter.
Raw Materials and Natural Resources and Agriculture and Husbandry recorded the strongest recovery in FPI scores in the quarter, rising by 8.72% to 86.07 and 5.07% to 92.86, respectively. Strong performance was also recorded in the Metals and Mining subsector, up by 9.4% to 85.21 in the quarter from 77.89 and the Agricultural Products subsector, which is up by 5.07% to 92.86 from 88.38.
