Corporate Profits Q1 2017-Q4 2022

Introduction

Corporate profits represent the income earned by all public and private companies operating in Ireland and is calculated using the same method as gross operating surplus (GOS) in national accounts. Corporate profits are a subset of total GOS that specifically measures the earnings of the non-financial and financial sectors. Similar to the accounting concept EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), these quarterly estimates provide a timely indicator of economic performance for the corporate sector.

GOS is traditionally estimated annually (see: ANA 2021 publication). This is because the primary data source is annual corporation tax filings. While quarterly GOS and Gross Mixed Income (GMI) estimates are provided in the quarterly national accounts, they are simply derived as a residual from the other Gross Domestic Product (GDP) methods. In this frontier release, quarterly estimates have been produced from the income GDP method using micro data. Specifically, using quarterly company survey data and various indicators of activity (see background notes for further information). These estimates of corporate profits serve as an initial experiment for developing quarterly estimates of GOS using the income method.

Results

Figure 1 displays estimates of corporate profits earned each quarter in the Irish economy since 2017. Table 1 also shows the values of corporate profits in this period. Corporate profits have maintained a continuous upward trend in this period. The quarterly frequency reveals larger profits earned in the most recent quarters of 2022. Profits of €79.8 billion were earned in the latest quarter Q4 2022, a 30.2% increase over Q4 of the previous year. Viewed over a longer timeframe, Q4 2022 profits represent a 52.7% increase over the pre-pandemic quarter Q4 2019.

These estimates have been broken down by economic sector (Figure 2) using the NACE Rev.2 classification system. Please see the background notes for further information on the composition of the six sectors displayed in these results. Industry profits earned in Q4 2022 (€43.2 billion) accounted for 54% of total profits in the quarter, making it the largest sector in terms of earnings. Information & Communication was the next largest sector earning €19.7 billion in Q4 2022. Comparing 2022 profits over the previous year, all six sectors displayed increases. In particular, profits in Other Services increased by 62.6% in 2022 to €24.1 billion. This sector is comprised of activities such as hospitality, transportation, legal & accounting, entertainment, and real estate among several others.

Using information on the ultimate controlling parent of enterprises, profits of foreign vs. domestically owned corporations can be compared*. Figure 3 shows the steeper growth in profits earned by foreign-owned corporations in recent years compared to their domestically owned counterparts. Foreign-owned corporations earned €261 billion in 2022, which represents a 98% increase over 2017, while profits of domestically-owned corporations increased by 61% over the same period. Figure 4 allows a visual comparison of profits earned in each economic sector and ownership group. Foreign-owned corporations in Industry, which is driven by multinational manufacturing enterprises, are the largest profits earners in the state; followed next by foreign-owned ICT corporations.

Continuing with the experimental theme of this analysis, quarterly estimates of consumption of fixed capital (CFC) within corporations have been developed. When the CFC attributed to corporations such as that on buildings, machinery, and intellectual property has been deducted from gross corporate profits, this allows a view of net corporate profits by economic sector (Figure 5 & 6). In Q4 2022, net corporate profits of €50.2 billion were earned in the state.