Russian companies are having their best year in the last three years and seem to put the recession years behind them as corporate profits continue to grow, bne Intellinews reports.
Profits remained strong and stable in June, increasing by 1,297 billion rubles ($19.4 billion) month-on-month, on a par with the previous months of this year, to a cumulative 8,040 billion ($120 billion) year-to-date, but well ahead of the same month in the previous three years.
Still, overall GDP growth remains anaemic with the economy expanding by only 0.9% in the second quarter after an even weaker 0.5% expansion in the first quarter.
While the crisis years of 2014-2016 pulled down the economy as a whole, they also caused a consolidation in most sectors concentrating the earnings in the hands of the best companies. Management has changed its strategy from growing market share as fast as possible to turning inwards to cut costs, improve efficiency and increase profitability. That has led to the somewhat counterintuitive situation where profits have begun to rise strongly even though overall economic growth is weak, bne Intellinews writes.
So far this year Russian companies have collectively earned just a bit less than 1,300 billion rubles every month except in April when they earned 1,593 billion rubles. In 2017 Russian companies earned more than 1,000 billion rubles in only three months of the year and in April 2017 they made only 523 billion rubles – a third of what they made in April this year.
The pace of growth in profits has also been accelerating. Profit growth took off in the middle of 2018. In the first half of that year profits were growing by around 10% a month y/y but from June 2018 they began to grow by 30% year-on-year and stayed at that level for the rest of the year.