Listed Swiss companies are on a solid financial footing
Listed Swiss companies are in a more solid financial position than they were a year ago. This is shown by the current 2022 Financing and Treasury Study of the Lucerne University of Applied Sciences and Arts. Despite the ongoing Corona pandemic in 2021, the companies were able to further increase their earnings power and reduce relative debt. The good financial situation is also reflected in the renewed increase in distributions and share buyback programs as well as in the IPOs recorded.
The Institute of Financial Services at the Lucerne University of Applied Sciences and Arts has published the current financing and treasury study for the year 2022. It examines how listed Swiss companies are financed and what options are available for action. For the analysis, data from the SMI and SPI companies are evaluated in each case.
Listed Swiss companies compare favorably with their international peers
The results of this year's study show: Distributions by all SPI companies, consisting of dividend payments, distributions from capital contributions and par value reductions, totaled 50.4 billion Swiss francs for the 2021 financial year. However, with a distribution yield of the Swiss Performance Index "SPI" of 2.41 percent, the relative dividend and capital repayment yield has reached a new low. This low results - despite high dividends - from the fact that share prices at the end of 2021 were around 20 percent higher than in the previous year. Share buybacks accounted for 24 percent of total distributions and share repurchases and amounted to 16.1 billion Swiss francs. The median market yield (earnings per share/share price) of SMI stocks was 5.1 percent in 2021, around one percentage point higher than in the previous year due to record earnings of certain stocks.
"The sum of distributions and share buybacks increased again in 2021," sums up Manuel Bauer, co-editor of the study and lecturer at the Lucerne University of Applied Sciences and Arts. With six IPOs (volume 2.2 billion Swiss francs) and an identified capital increase volume of already listed companies of 2.3 billion Swiss francs, the Swiss equity market was also very active again. And in 2021, debt - in relative terms - actually declined. The data suggests that listed Swiss companies have a solid financial situation and that the capital market is supporting healthy growth. "It is no coincidence that Swiss companies have also performed well in an international comparison in recent years," Bauer said.
Higher interest-bearing debt, lower relative indebtedness
As of the end of 2021, the 167 non-financial companies surveyed had the following capital structure of the cumulative balance sheet total of CHF 871 billion: 43.9 percent equity and 56.1 percent debt. The interest rate situation in 2021 was again reflected in an increase in companies' short-term and long-term interest-bearing liabilities. Thus, interest-bearing liabilities increased by 45.8 percent to a total of 245 billion Swiss francs in the years 2012 to 2021, corresponding to an increase of 77 billion Swiss francs. Compared to the previous year 2020, this represents a further increase of nine percent. "The study once again showed the importance of financing with bonds, which account for three quarters of the interest-bearing debt outstanding on the market," explains Thomas Birrer, co-editor of the study and Professor of Corporate Finance at the Lucerne University of Applied Sciences and Arts. The three largest non-financial companies, Nestlé, Roche and Novartis, together issued 65 percent of the total volume, indicating their significant importance in the Swiss capital market for non-banks, the finance expert said. With the increase in interest-bearing debt, net debt also increased by 30.2 percent since 2012. However, the median net debt/EBITDA ratio fell from 0.49x in 2012 to 0.38x in 2021, compared with 0.68x in the previous year.
Green bonds and sustainability-linked bonds on the rise
Environmental, social and governance (ESG) aspects are playing an increasingly important role in corporate decision-making. This is also true with regard to financial decisions. In this respect, it is hardly surprising that the global volume of green bonds issued more than doubled to 605 billion US dollars in 2021. Switzerland has also been busy issuing green bonds. Debt capital amounting to CHF 2.8 billion was raised in 16 transactions. As predicted in last year's study, the growth trend continued in 2021 and this is likely to be the case in the coming years. "In this respect, it will be interesting to observe what proportion will be financed green in the future," says Thomas Birrer.
Working Capital Management
As part of this year's study, the HSLU research team also examined the working capital management of listed Swiss companies for the first time in the period 2012-2021. The customers of the companies studied paid their invoices 6 days earlier in 2021 compared to 2012. At the same time, they paid their supplier invoices 7 days later on average during this period. By collecting customer payments earlier and paying supplier invoices later, these companies saved about 17 billion in cash during the corresponding period, all other things being equal. In the first Corona year 2020, no significant changes were observed in the payment behavior of companies compared with the previous year.
Source: Lucerne University
