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Highly International Southeastern Companies Have More Consistent, Higher Profit Margins Than Domestically Focused Peers

Stocks in this article: HBC

Southeastern companies with higher levels of internationalization had more stable and higher profit margins than their more domestically oriented peers over the past six years, according to a new report commissioned by HSBC Bank USA, N.A. (HSBC).

The average profit margin at highly international Southeastern companies enjoyed a general upward trend from the difficult years of the recession to finish at five percent in 2012, according to the HSBC report, ‘Spotlight on US Trade: Southeast.’ In contrast, companies with low levels of internationalization showed huge swings in profitability -- plunging into the red in 2008 and 2009 before rebounding in 2010 and climbing to two percent in 2012. Additionally, high international Southeast companies over the period 2007 to 2012 had an average profit margin of three and a half percent while low international Southeastern companies were, on average, unprofitable.

“These findings reinforce our belief that companies that take advantage of new customers and lower-cost resources can better weather market fluctuations and increasing domestic competition,” said Richard Lavina, Executive Vice President, Southeast Corporate Banking for HSBC Commercial Banking in the US. “In fact, HSBC recently announced a $1 billion, 18-month dedicated loan program for small and medium size US businesses looking to export or expand internationally, to help companies find global growth opportunities and to further accelerate global business growth by US enterprises.”

The HSBC report analyzed the level of sales and operations abroad among US publicly listed companies based in the Southeast and across the nation to understand the impact of international sales and operations on profit margins of business by region and by select industries. The Southeast report included companies from the states of Florida, Georgia, North Carolina, and South Carolina.

A Booming Manufacturing Sector

Though agriculture is still a key part of the Southeastern economy, the past 20 years have given way to a focus on manufacturing, specifically automobiles and auto parts. The shift has made the Southeast a key player not only in the American automobile industry, but as an exporter to the global industry as well. In fact, manufacturing helped the region recover from the collapse of the housing market and several years of job losses. Transportation equipment, the largest segment of the region’s manufacturing, accounted for $30.6 billion in Southeastern exports in 2011.

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