Worst of financial crisis yet to come: Dun & Bradstreet

Business is not yet through the worst of the crisis, with many companies just starting to feel the impact. The latest Dun & Bradstreet National Business Expectations Survey, which looks at the outlook for the June quarter 2009, says sales and profits expectations continue to dive, with 57% of companies anticipating declining sales and 65% expecting declining profits. Employment and capital investment are following the same downward trend, with 27% of firms expecting to cut back staff and 12% forecasting they will cut back on capital investment.

CEO of D&B, Christine Christian, says this is not the worst expectation survey results she has ever seen, but says it “is hovering around what we saw in 1991”.

The tough credit market and a falling Australian dollar is having a major impact, with 54% of businesses saying they are now negatively affected by the credit market and more than seven in 10 saying they are hurt by the falling value of the dollar.

“Credit continues to be a major concern. The first problem is that accessing funds from a bank at a viable price is nearly impossible. The second is that it is now not the norm to pay bills on time.”

Christian says there is no doubt from these results that Australia is not yet through the worst of the crisis.

“Of most concern is the significant drop in employment expectations. This is a clear sign that businesses are preparing for the worst and the impact on Australian households could be significant,” she says.

She says that the D&B database is showing that one in eight businesses will experience extreme financial distress in the next calendar year or even fail.

“We saw it this low in 1991 and after the introduction of GST when many small businesses fell over,” she says.

Reductions in official cash rates since October have affected executives’ views on the issue, which will influence their operations most in June.  About 58% of executives rank interest rates as the primary influence on their business in the quarter ahead, an increase of 22% since December.

In the December quarter, 46% of firms experienced lower sales and 62% recorded lower profits.

One bright spot has been the decline in petrol prices, with fewer than 5% of companies now reporting a negative impact.

Selling price expectations have eased slightly, however three in four businesses expect to raise prices in the June quarter.  

Related stories:

• It’s worse than we thought: Kohler
• 25 corporate collapses – and the lessons learnt