Santander | The publication of the 2018 results have practically finished, and Europe´s company profits have shown their resilience in a global scenario dominated by the uncertainty generated by the fear of a “trade war”, volatility in emerging markets, currency weakness, Brexit, the increase in populism in the South of Europe…
In this scenario, Spanish companies have published solid results despite the headwinds of the Euro appreciation and low interest rates which continues to impact on Spanish banks’ profitability (finance accounts for a third of the profits of Ibex 35 members). Despite all these factors, Spanish companies have increased sales 5.1% (compared to a European average of 2.9%) and net profits 4.3% (compared with a European average of -7.6%).
In addition Spanish companies have maintained their financial discipline, and financial indebtedness of the companies which belong the Ibex 35 increased by only 2.1% yoy.
The introduction of IFRS 16 (International Financial Reporting Standard) beginning with the results of Q119 could increase the indebtedness of non-financial companies by almost 22 billion euros (around 12% from current levels). However, the impact on financial ratios should be more modest given that the Ebitda could grow around 6% yoy. So, in our initial estimates, the net debt/Ebitda ratio of the Ibex 35 would go from the current 2.14X to 2.29X after the publication of the results according to the IFRS 16 norms.