The total net profit of companies operating in Poland employing 50 or more people in the second quarter of 2023 amounted to PLN 75.3 billion, according to the Central Statistical Office. Despite the slowdown that has set in for good in the global economy, the result was only PLN 350 million lower than in the same period last year. Then a quarterly record was set – companies earned PLN 75.7 billion in three months.
Post-Pandemic Surge
The last significant deterioration in the performance of domestic companies was related to the pandemic. The government-ordered lockdown of parts of the economy and the restrictions on the movement of people caused total profit in medium and large enterprises to fall to less than PLN 19 billion in the first quarter of 2020. Even more pronounced was the slump in the performance of companies listed on the Warsaw Stock Exchange, which earned a total of less than PLN 1 billion at the beginning of 2020. Despite the fact that from the point of view of financial performance, listed companies performed worse in the last quarter of 2019, this was primarily due to a significant adjustment in the value of energy companies’ assets.
The decline in corporate profits in 2020 was influenced not only by local factors. One of the important consequences of the pandemic was a strong discount in the commodities market. Although mostly short-term in nature, it lowered the performance of the country’s vital mining industry. Reduced mobility around the world significantly reduced demand for oil and its derivatives, reducing the profits of oil companies, which contribute significantly to the total performance of domestic companies.
However, after surviving 2020, also thanks to state aid, companies started to gain more profit rapidly in the following years, which was driven by several key factors. One of the most important was the additional savings accumulated by consumers. Historical statistics show that the propensity to save significantly increases during economic crises. In 2020, this correlation was particularly evident, as the pandemic meant that there were limited opportunities to spend money. In Poland, the savings rate jumped from 3–4 per cent in 2018–2019 to as much as more than 20 per cent in early 2020 and remained at elevated levels for several quarters. Starting in 2021, households began spending these excess savings, increasing demand for goods and services.
At the same time, one of the important consequences of the pandemic was the disruption of supply chains, which limited the supply of many goods on the market. Higher demand on the one hand and limited product availability on the other meant that companies were able to significantly increase their margins. This trend has been evident since the first quarter of 2021, when the total profits of domestic companies rose to a then-record PLN 47 billion and were more than 50 per cent higher than a quarter earlier.
The ratio of profit on sales to revenue, i.e. the difference between revenue from core operations and costs, then reached 6 per cent for the first time. The indicator has remained at least at 5 per cent for ten consecutive quarters. It averaged 5.9 per cent over the period. By comparison, in the period 2015–2019, the average margin on sales was 4.7 per cent, and only in single quarters did it exceed 5 per cent. This means that even during the economic downturn that the national economy has been in since the second quarter of 2022, companies are able to impose high margins on their customers.
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Raw Material Records
A spell of records in the performance of domestic companies came last year. One of the consequences of the Russian aggression against Ukraine at the beginning of the year was a sharp acceleration in the price of commodities that have been in upward trends as a rule since mid-2020. The price of a barrel of Brent crude oil reached USD 120 in the first half of last year, although two years earlier it was below USD 20. Combined with concerns about fuel supplies, this has caused oil companies’ margins and profits to soar.
PKN Orlen, the largest company in our European region, earned PLN 33.5 billion in 2022, the best result in the history of our national economy. Part of the outcome was the result of Orlen’s merger with oil processing company Lotos and domestic gas market leader PGNiG. The previous record for annual profit for a domestic company was PLN 11.1 billion, jointly held by Orlen (in 2022) and KGHM (in 2011).
The jump in commodity prices has put sectors of the economy that generally have trouble making profits, such as mining, on the upswing. WSE-listed Jastrzębska Spółka Węglowa, a producer of coking coal and coke, earned PLN 7.6 billion in 2022, the most in its history. KGHM, one of the world’s leading copper producers, made billions of zloty in profits in 2021 and 2022.
The war in Ukraine has created favourable conditions for some domestic companies, not least because it resulted in sanctions eliminating Russian products from the market. For example, the imposed ban on steel imports was one of the factors that led Cognor, the country’s leading steel producer, to welcome a record profit in 2022 (PLN 569 million).
In turn, the influx of refugees from Ukraine has increased consumer demand, primarily for basic goods. This has contributed to record profits for companies such as Dino Polska. Last year, the company posted a net profit of PLN 1.1 billion. It has also kept improving its performance since the beginning of 2023.
More Work, Higher Wages
The record performance of domestic companies translates into positive statistics concerning the domestic labour market. Although the rate of growth in the number of people working has slowed in recent months due to the global downturn, employment is still near its highest ever levels, putting us in the top tier of Europe with an unemployment rate of just 2.8 per cent. Average wages in the corporate sector have continued to grow at a double-digit rate since February 2022. In August, it was up by 11.9 per cent year-on-year, which means real wage growth. Indeed, the value published by the CSO is higher than the inflation rate, which stood at 10.1 per cent in August and had already fallen to 8.2 per cent in September.