Nearly a third of ASX-listed companies are fragile, at risk of financial catastrophe, report says

Updated

A report out today on the health of Australia's listed companies says nearly a third are confronting the risk of a financial catastrophe.

Analysis of almost 16,000 annual reports by professional accounting body CPA Australia showed more alarm bells were ringing now than during the depths of the global financial crisis in early 2009.

The research, conducted between 2005 and 2013, said the red-flagged companies were exposed to the dual risks of the end of the mining investment boom and an unexpected slowdown in China.

The CPA study was based on the snowballing of "going concern" warnings from auditors which were used to flag "significant uncertainty" in a company's ability to survive.

CPA Australia chief executive Alex Malley told the AM program the findings were a sobering reality check that many Australian companies were fragile.

"We've been talking about the potential impacts of the slowdown in China, the strength of the Australian dollar and the effects of the tapering mining boom on the economy for some time," he said.

"Now this report, compiled based on virtually all companies listed on the ASX, shows these economic factors are being felt across the market and are putting almost a third of ASX-listed companies at risk of financial catastrophe.

"It really begs the question how our economy would be placed were we to face another shock like the GFC."

According to the research, the going concern warnings rose significantly in the energy and mining sectors, with more than 40 per cent of companies feared to be at risk in 2013.

The report comes as evidence mounts that China's economy is slowing faster than expected and that the official growth target of 7.5 per cent might not be achieved this year.

Australian miners are exposed with the iron ore price now at a fresh five-year low of around $US79 per tonne.

However, the CPA report said non-mining sectors such as consumer staples, industrials, health care and utilities were also facing concerns about their financial health and how they would fare in another global shock.

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Topics: economic-trends, business-economics-and-finance, company-news, stockmarket, markets, australia

First posted