Saturday, December 2, 2023

Profits not excessive, say analysts, after AMLO urges moderation

Profits made by companies in Mexico are not excessive, analysts said after President López Obrador urged moderation from the private sector.

“The private sector should, of course, do business, it’s their main role but at the same time seek reasonable profits, respect the legal framework and pay taxes, all that helps a lot,” López Obrador said on Thursday.

Data shows that company profits in Mexico are not excessive compared to those made in other countries in the region and beyond.

In the third quarter of 2019, the average profit margin of the 35 largest companies listed on the Mexican Stock Exchange was 7.19%, the newspaper El Financiero reported.

During the past decade, the average profit margin of the 35 companies included in the S&P/BMV index has been 7%.

Comparable indexes in Argentina, Brazil and China showed that third quarter profit margins were 17.3%, 9.3% and 7.5% respectively.

In Chile and Japan, profit margins were lower than Mexico between July and September but only slightly. Their profit margins were 6.6% and 6% respectively.

Jacobo Rodríguez, director of financial analysis at Black Wallstreet Capital, told El Financiero that the profits of large companies operating in the United States exceeded expectations in the latest reporting period and are greater than those made by companies in Mexico.

According to data from Bloomberg, the average profit margin of the companies listed on the S&P 500 index is 9.92%.

“The objective of any company is to be profitable so I don’t think that profits [in Mexico] are excessive,” Rodríguez said.

“In recent years, [companies] have tried to be more socially responsible but I don’t think that’s related to profit generation,” he added.

Juan Carlos Minero, chief investment officer at Black Wallstreet Capital, said the government is ignorant about how the private sector operates.

“The problem is that the government, mainly López Obrador, doesn’t understand finances, doesn’t understand profits, and that’s what business is,” he said.

Source: El Financiero (sp) 

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