In the first quarter of 2023, the profitability and results of Spanish companies rose notably. The Bank of Spain released on Monday the quarterly central balance sheet data, covering the pre-tax results and atypical items of the surveyed sample. Overall, the gross ordinary result climbed by 68.1% compared with the same period in 2022, driven by stronger operating performance in intermediate production costs and financial income. The energy sector stood out, tripling its gross ordinary result in this quarter compared with a year earlier.
Despite higher personnel costs, savings on production expenses lifted profits
Overall gross ordinary profit grew by nearly 70% while sales barely advanced, rising by 0.7%. Meanwhile, personnel expenses rose by 8.3%. The Bank of Spain notes that 916 non-financial companies (representing 12.1% of the total gross value added in the surveyed group) contributed to these figures, with employment increasing by 2.2% on average during the period and average wages up by 5.9%.
The central balance sheet survey indicates that industry, energy and large companies are overrepresented. While this does not negate the general trend shown by the data, it requires careful interpretation of the precise figures reported by the Bank of Spain’s Research Service.
The energy sector doubles its results
In fact, the report highlights that a subdued sales dynamic in this quarter—partially tied to a raw sales decline of 0.7%—coexists with remarkable energy sector performance. Following a strong 98.3% expansion in the first quarter of 2022, energy activity contracted by 14.5% in 2023, while industry, trade and hospitality, information and communications, and other activities also posted declines.
Nevertheless, the energy sector managed to double its gross economic result (a 103% increase), raise its operating profit margin by 16.4%, and lift its pre-tax result by 2.4 times. It also pushed up the normal return on assets to 6.9%.
Yet the energy sector faced profit pressure from higher intermediate inputs and personnel costs, which reduced gross profit by 15.6%. Although the sector’s operating profit rose by 38.9%, the net ordinary result before tax fell by 30.8%.
Turnover by company type shows that large firms posted almost a 0.6% quarterly increase, while medians grew by 16.8%.
The outlook is more profitable than the pre-pandemic period
Lower raw material and energy costs, along with the easing of bottlenecks in international supply chains during early 2022, contributed to reduced production costs and a broader recovery in business performance.
The return on assets reached 3.7% in the first quarter of 2023, up from 2.2% in 2022 and slightly above the 3.1% observed in the first quarter of 2019 before the pandemic, according to the Bank of Spain’s analysis. The energy sector strengthened profitability to 6.9% in 2023, compared with 2.3% in the same period in 2022. In information and communications, profitability rose from 5.9% in Q1 2022 to 9% in Q1 2023, based on the same central balance sheet database.