More firms see return to prepandemic profits in 2022

Most business leaders in Southeast Asia expect their enterprises to return to prepandemic profitability levels by 2022 and most are in the thick of business and technology transformation program to sharpen their strategic focus.

This was according to the 23rd edition of EY Global Confidence Barometer, a regular survey of senior executives from large companies around the world conducted by Thought Leadership Consulting, a Euromoney institutional investor company. “The pandemic has fueled a strategic reset, with bold investment intentions now focusing on thriving rather than just surviving on the other side,” EY global vice chair for strategy and transactions Andrea Guerzoni said in the study.

Relief and optimism are the two sentiments underpinning responses to the latest EY survey of more than 2,400 C-suite executives globally, he noted.

Majority of companies globally are satisfied with their pandemic-response performance relative to competitors, but this was more about surviving than thriving, Guerzoni said.

‘Ricocheting recovery’

“What is interesting is despite the madness and mayhem of the last 12 months, we have seen a very rapid and almost ricocheting recovery both from macro factors but also perhaps in optimism,” said Vikram Chakravarty, EY Asean Strategy and Transaction leader, who presented the results of the survey in a briefing on Wednesday.

As far as optimism was concerned, respondents from Southeast Asia were running ahead of the global number. About 59 percent expect recovery to prepandemic profitability by 2022, higher than the 44 percent who expected such rebound globally.

On the other hand, 23 percent of Southeast Asian respondents projected a rebound by 2023 while 1 percent were pessimistic that a recovery would happen only in 2024. About 1 percent of the respondents did not see a return to prepandemic levels.

Meanwhile, about 4 percent of Southeast Asian firms had not seen any decline in revenue or net profits, based on the study.

In general, there seems to be a rising wave of optimism across Southeast Asia compared to the muted sentiment six months ago, Chakravaty noted.

Meanwhile, 56 percent of regional respondents look to actively pursue mergers and acquisitions (M&As) in the next 12 months.

Southeast Asia has lagged significantly in the M&A scent in the last five to six years, Chakravat noted. However, he said more and more enterprises were now looking for more deals.

As they seek to sharper strategic focus, about 83 percent of Southeast Asian respondents were currently undergoing a business and technology transformation program, he said.

In the Philippines, many companies were looking for M&A opportunities, said Noel Rabaja, SGV Strategy and Transactions Service Leader (Philippines). For some conglomerates, he said it would be a combination of acquisition and divestment.

Rabaja said many conglomerates were reviewing their current portfolio and looking to divest some assets. Much of the fresh capital to be raised from the divestment would be channeled to new businesses and execute new business models, he said.

M&A deals would likely include a combination of expansion within domestic shores but more companies were now scouting for opportunities for international expansion, Rabaja said. —Doris Dumlao-Abadilla