Find out whether ASX businesses were able to successfully navigate the headwinds during FY22, which industries won and lost, and what to look out for in FY23.
Just as positive signs were emerging in late FY21 following a challenging year navigating COVID-related disruptions, economic recovery was stunted at the beginning of FY22 with ongoing impacts and lockdowns resulting from the Delta variant.
By December 2021, restrictions had eased and demand appeared to be returning. When Omicron hit however, it severely impacted global supply chain networks and forced many public-facing businesses into voluntary lockdowns, this time with minimal Government support.
In the background, many sectors were severely impacted by ongoing labour market challenges due to prolonged border closures. Further, unprecedented weather events hit the East Coast of Australia in Q3 FY22, resulting in further disruption to national logistics networks.
Despite these headwinds, ASX businesses demonstrated robust growth in revenue and operating profits in FY22, with 55% of ASX businesses reporting EBITDA growth. However, the median ASX market cap had declined by 19% by the end of September 2022, implying performance had been generally below market expectations, compounded by the FY23 market headwinds of continued inflation and rising interest rates.
*Source: CAPIQ and Deloitte analysis
Headline inflation has been at its highest since the early 1990s, being largely supply-side driven with global stock shortages and commodity cost increases, fiscal stimulus and Russia’s invasion of Ukraine. The RBA began to normalise monetary policies increasing the cash rate by 25 basis points in May, with three increases of 50 basis points each in the following five months.
Whilst some economists say that inflation may have peaked in July, other factors will drive uncertainty into the foreseeable future, including the impact of higher interest rates on both consumer sentiment and the cost of capital. These factors are evident in current capital markets uncertainty. It appears that ASX businesses will have another volatile year to navigate through FY23.
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