Almost every fourth company in Poland recorded a loss. PIE report for 2024

As a result of declining sales and rising operating costs, companies in Poland recorded the lowest profitability in the last 10 years in 2024, the Polish Economic Institute (PIE) reported on Monday. He added that almost every fourth company ended the year with a loss.

PIE pointed out that in the period 2020-2024, Polish enterprises were affected by a number of internal and external factors related to the COVID-19 pandemic and the war in Ukraine. Moreover, a sharp increase in raw material prices and high inflation had a significant impact on the change in companies' profitability.

“As a result of declining sales and rising operating costs, in 2024, companies in Poland recorded the lowest profitability in the last 10 years. The profitability of net turnover decreased to 3.4%, and the share of companies making a profit dropped to 77.2%, which means that almost every fourth company ended the year with a loss,” the Institute reported.

In terms of sectors, the greatest drop in profitability was recorded by capital- and labor-intensive industries, including industrial processing, construction, trade, transport and warehousing. In these sectors, declines in EBITDA margins, asset turnover and a weakening of the financial leverage effect were observed, which together resulted in a deterioration of the ROA (return on assets) and ROE (return on equity) indicators.

The publication emphasized that these industries were also struggling with rising labor costs, which required strict cost discipline and increased productivity. In turn, information and communication and other service activities – despite the increase in labor costs and decline in margins – have retained relatively high profitability and financial stability. Companies from the accommodation and catering industry, after a strong decline in 2020 related to the pandemic, recorded a dynamic rebound in 2022-2023, and in 2024 the growth rate of profitability slowed down. According to PIE, the stability of these sectors was supported by high asset turnover, economies of scale and prudent liquidity and debt management.

“In 2024, the revenues of medium-sized and large non-financial enterprises decreased by 3% y/y, while costs decreased only by 1.8%. As a result, the profitability of net turnover of companies dropped to the level that was among the lowest in 2014-2024. The consequence of the low profitability of many companies was a limited scale of investments and, therefore, their slower development. An additional factor inhibiting investments were the high costs of credit. with record NBP interest rates in 2022-2023. As a result, real investment outlays decreased by 7.8%. The dominant share of financing from own funds was also not conducive to investing,” she noted. Anna Szymańska, deputy head of the Economic Foresight Team at PIE, quoted in the publication.

The Polish Economic Institute is a public economic think tank; prepares reports, analyzes and recommendations regarding key areas of the economy and social life in Poland. (PAP)

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