Southeast Asian margin squeeze snags Singapore Inc

Sun Feb 24, 2013 7:32pm EST
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By Eveline Danubrata and Tripti Kalro

(Reuters) - The most widespread margin squeeze in at least a decade is pushing some Singapore companies out of the city state as rising costs and slow growth sap profitability.

A Reuters study of 268 listed Singapore companies showed that 57 percent reported a year-on-year drop in operating profit margin for the first three quarters of 2012. That was the biggest percentage for the nine-month period on record, according to Thomson Reuters data going back to 2002. Full-year data for 2012 was not yet available.

A severe labor shortage is hobbling businesses in Singapore as the government tightens its immigration policies, while growth has been hard to come by as exports languish in a dull global economy.

Across Southeast Asia, 54 percent of companies reported shrinking margins, equaling the percentage recorded in 2009, when the global economy had tipped into a recession following the Lehman Brothers bankruptcy.

In all, Reuters examined the balance sheets of nearly 1,000 companies in Singapore, Malaysia, Indonesia, Thailand and the Philippines with a market value of at least S$100 million ($80.8 million).

The pain is particularly acute in Singapore, a smaller and more mature market lacking the burgeoning consumer classes of its emerging market neighbors. Inflation has heated up, with the consumer price index, due on Monday, expected to show a 4.0 percent rise in January, according to a Reuters poll.

The head of a Singapore business association is among those moving their corporate headquarters elsewhere, in search of lower costs and a larger market.

Chan Chong Beng, head of the Association of Small and Medium Enterprises in Singapore and chairman of Goodrich Global, a carpet and wallcoverings company with a presence in eight countries, said he planned to move his firm's headquarters and operations such as product development to Wujiang, China, near Shanghai. Sales and marketing will stay in Singapore, he said.   Continued...

Shoppers leave the flagship Courts Megastore in Singapore, February 21, 2013. REUTERS/Edgar Su