Business Irish

Friday 24 January 2020

Top company bosses remain cagey about future trading outlook as economy slows

Leading firms are concerned about consumer spending as we dip back into recession, writes John Reynolds

AS THE latest CSO figures last week revealed that the economy was technically back in recession for the last three months of last year, uncertainty and pessimism are also resounding among the bosses of the big Irish listed companies that have recently reported their latest results.

Minister Joan Burton may have told the world that Ireland was "marching towards recovery," earlier this week, but there are no real signs of this. Media companies UTV and INM, whose outlooks for advertising spending may be the best sign of confidence in the future, or the lack of it, show only a small blip of confidence in online media from INM.

"The UEFA Euro championships and the London Olympics, will have a positive impact in attracting a large volume of both listeners and viewers to our radio and television output, generating an attractive prospect for advertisers," said UTV chief executive John McCann.

"But fragility of consumer confidence and the slow economic recovery should not be underestimated," he added, predicting TV ad spending to fall by five per cent this quarter and radio ad spending by three per cent.

INM chief executive Gavin O'Reilly is also cautious. "Forecasting in the current climate is very difficult and, at present, advertising conditions remain challenging and erratic. Visibility remains short and susceptible to influence by macro-economic factors," he said, adding the positive news that digital revenues had grown by 10 per cent.

Advertisers are only too aware that consumers are struggling with debts, taxes (and more are coming) and rising fuel prices. Most of us have less disposable income and are more likely to save than spend. This is borne out in CSO figures showing a 2.7 per cent fall in personal consumption last year and a 2.2 per cent fall in GNP in the last quarter of 2011.

Added to these pressures, 84 per cent of emigrants who are leaving at the rate of over 1,000 a week are in the under-35 age category, according to a recent survey -- and this age group is a prime target audience for advertisers. The same number had master's degrees, PhDs, degrees or diplomas.

Our much-needed future earning -- and spending power -- is leaving in droves, while those of us who remain here have less to spend.

Our leading food and farming company bosses are also cautious.

"We expect the operating environment in 2012 to be more challenging than in recent years," said Glanbia boss John Moloney.

"Current global economic uncertainty has the potential to impact global dairy markets and fragile consumer confidence. The Irish economic and fiscal backdrop offers little respite at present to consumers."

Kerry Group is feeling the effect as consumers turn to cheaper brands and look for promotional offers, according to chief Stan McCarthy. "Further tightening of household budgets in Ireland and the UK has continued to drive value consumption and increased market promotional activity," he said.

Aryzta boss Owen Killian has investment, cost-cutting and acquisition plans, but these may not benefit the Irish economy. "We're focused on food innovations around customer insights to identify and exploit cost efficiencies . . . supported by increased investment in emerging markets and availing of bolt-on acquisition opportunities," he said.

The bosses of Irish Ferries and Aer Lingus are still fearful for consumer spending.

We spend €4bn a year on foreign holidays, while we struggle to attract tourists here from our core United States, Europe and UK markets.

Ryanair won't put on extra Dublin flights and Aer Lingus boss Christoph Mueller is launching just two new routes this year.

"2012 capacity deployment will be kept flat compared to 2011, while our key challenges are that fuel price inflation is likely to be a key source of uncertainty in 2012 and increasing passenger volumes will be hard given muted markets," he said.

"Ireland is a very open economy and trade flows in 2012 will be negatively affected by the slowdown in the UK and euro area. The Irish consumer faces another difficult year as austerity programmes continue and this is likely to affect import volumes," said Irish Ferries boss Eamonn Rothwell.

The trend is towards a fall in people taking their cars to the UK or France, but higher foot passenger numbers -- indicating more people travelling on a budget.

Unless there's an influx of tourists travelling here on Etihad, Emirates or the small number of other foreign airlines that operate out of Dublin, it's difficult to expect anything but a modest growth in tourist numbers this year, if that, while more of us will holiday at home rather than abroad.

In construction, cutting costs and capacity here was the focus of Readymix and CRH last year, and this contributes to money being taken out of the Irish economy. "There is uncertainty in relation to the growth outlook for Europe in 2012," said CRH CEO Myles Lee. While no one is building anything, we also have little money to spend on DIY, noted Grafton Group boss Gavin Slark, who is focused on "cost savings and modest turnover growth," and pointed to "pressure on disposable incomes, concerns about employment prospects and very tight credit conditions," leading to weak demand here.

The battered economy continues to drag on the banks as they compete for deposits and struggle to make money on other products. "The domestic economy faces ongoing challenges with fragile consumer sentiment and weak consumer demand providing a considerable constraint on growth," said Bank of Ireland CEO Richie Boucher.

AIB's results, which are out next Friday, are expected to detail further cost-cutting measures in light of the recent loss of 2,500 jobs, while account holders have just been hit with new charges -- all piling further pressure on the economy.

Anne Heraty, boss of recruiter CPL -- which now profitably places a third of its candidates for permanent jobs abroad -- has little hope for an upturn in employment here and said: "Very significant uncertainties remain in our principal markets... we do not expect they will grow significantly in the near future."

With so much focus on cost-cutting and survival, and precious little sign of these firms having the confidence to invest in any way that will reduce the 400,000-strong dole queues, that sentiment is likely to remain at least until the end of the year and, if anything, a lot longer.

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