Labour's incumbent Finance Minister Grant Robertson has been downgraded by big business leaders, while National's finance spokeswoman Nicola Willis has risen in their ranks.
Video / Alyse Wright
Finding and retaining skilled staff is still an issue for chief executives but far less so than this time last year as concern shifts more toward finding revenue growth and managing profit expectations.
This trend is borne out in the Herald’s Mood of the Boardroom survey with CEO’sfocusing hard on how their businesses will perform in a sluggish economy.
Last week’s GDP figures showed the economy grew just shy of 1 per cent in the second quarter and, based on revisions to earlier numbers, the country may have just avoided being in a technical recession through the December and March quarters.
The latest data will have buoyed business owners and CEOs, especially those providing business services and in manufacturing, which saw increased activity in the June quarter after five successive declines.
However, the structural challenges in the economy remain. The better-than-expected economic growth could be seen as a double-edged sword in terms of arousing the inflation beast that the central bank has been battling to put back in its cage.
Market reaction to the GDP numbers suggests risks are now tilted toward further interest rate hikes, which combined with low export prices could easily tip the country into recession later this year and into 2024.
Notwithstanding this uncertainty, CEOs are pessimistic in the short term at least.
Asked which issues are most likely to keep them awake at night, 31 per cent said achieving top-line revenue growth and 30 per cent said managing profit expectations. Those are up from 23 per cent and 13 per cent respectively on last year.
A slight majority of those surveyed are expecting to increase revenue growth in the next 12 months (55 per cent) with 23 per cent saying no and 18 per cent expecting flat revenue.
In terms of profit, 44 per cent said they were expecting an increase, 28 per cent a decrease and 21 per cent said no change.
CEO comments on the survey indicated some of the pressure points.
Containers at Ports of Auckland. Photo / Michael Craig
“The transport market is softening - particularly import and export container volume,” said Peter Reidy at KiwiRail.
“Revenues will be down due to milk price pressure and slow China recovery,” said a dairy industry CEO.
“It seems that conditions will be tight and tough until the end of 2024,” said a wine company boss. “At the luxury end of wine, this impacts my business directly as consumers flock to value wine in grocery around the world.”
A respondent from the professional services sector involved in infrastructure said: “This really depends on what happens post-election and how quickly infrastructure projects come to market, and what gets delayed, postponed …”
Sourcing and retaining skilled staff is still seen as the biggest issue with 37 per cent of CEOs citing that as keeping them awake, but it’s way down on the 83 per cent who selected it in last year’s survey.
Regulatory challenges (35 per cent) and the impact of policy uncertainty (32 per cent) were also high on the worry list, while cyber security has been elevated with 24 per cent selecting that as their main worry – up from 11 per cent a year ago.
Other issues this year were improving operational efficiencies (23 per cent), achieving cost reduction (15 per cent) and motivating key reports (9 per cent). They were all higher areas of concern among CEO respondents compared to last year.
The recent listed company reporting season highlighted the somewhat softer outlooks most firms are facing.
Air New Zealand recorded bumper profits as the tourism market picked up but it's unclear how long the party will last. Photo / Estelle Sarney
Investment firm Jarden said the reporting season generally showed improved earnings but tempered outlooks. Inflationary pressures, high-interest rates and electoral uncertainty made it hard for corporate management teams to predict the future.
Jarden’s analysis, reported by BusinessDesk, said 79 per cent of the 37 companies they cover were in line with revenue predictions, 47 per cent met expectations for earnings before interest, tax, depreciation and amortisation (Ebitda), while dividends per share met Jarden’s forecasts 56 per cent of the time.
Jarden upgraded its target prices on 11 companies and downgraded 20, saying earnings showed skinnier margins as firms grappled with increased costs. Its analysts noted the bottom lines were getting squeezed by rising interest rates.
While some companies – like Air New Zealand – had extraordinary profits last year, it’s uncertain whether they can continue those numbers.
Likewise, Fonterra had a record profit in the 2023 financial year, but many of its farmer shareholder suppliers are struggling to make ends meet with the low milk price at the moment.
At least one big uncertainty should hopefully be resolved soon and that’s the general election.
