Asia-Pacific Region Grabs Lion’s Share Of 2017 Earnings

Asia's economic star is rising fast.

“Go west, young man” was the advice New York Daily Tribune editor Horace Greeley reportedly proffered to ambitious Americans in the mid-19th century. Today, the direction might have to be reversed for those contemplating a corporate career. The Asia-Pacific region (APAC) accounted for the largest share of the estimated $4.3 trillion in global corporate earnings in 2017, according to a study by GlobalData, the London-based data and analytics company.

Based on a sample of 36,000 global companies, the study gave APAC a 38% share of the profit pool, followed by 30% for North America, 25% for Europe, 4% for South and Central America, and 3% for the Middle East and Africa (MENA).

Europe, recovering from the difficult years following the Great Recession, boasted the fastest growth in corporate profits in the four years from 2013 to 2017, the study found. Europe’s total corporate earnings during that period rose by 40.6% over 2013, followed by 32.6% for South and Central America, and 28.1% for APAC. North America saw a more moderate rise of 3.5%, while MENA suffered a decline of 7.3%.

“North America’s profitability was impacted by the 2017 tax reforms in the US, which forced companies with deferred tax assets to incur one-off tax costs,” says Parth Vala, financial analyst at GlobalData. “Even so, the region continued to be the second leading region by value, although its gap with APAC widened remarkably in 2017 from 2013.”

The US may be making a comeback. More recent data show that US corporate profits jumped 16.1% in the second quarter of 2018, for the biggest year-over-year gain in six years, according to the US Commerce Department. Taxes paid by US companies in the quarter fell by 33% from the previous year.

However, the Commerce Department reported that earnings abroad by US companies were lower in the second quarter than in the first, although remaining well ahead on an annual basis. Profit margins for big US companies are near all-time highs.

Broken down by industry sector, financial services led in global net profits in 2017 with a 29.9% value share, followed by technology and communications (11.1%), construction (10.2%), consumer (5.8%), oil and gas (5.8%), pharmaceutical and health care (3.6%), metals and mining (3.2%) and others (28.4%).