AGED DEBT LEVELS A WORRY EVEN AS RISK LOOKS OK

By NZHJ June 27, 2022 Industry News

Neutral May risk data belies a worrying underlying increase in 60-90 day industry debt levels.

Our regular data series in partnership with CreditWorks Data Solutions (www.creditworks.co.nz) assesses the level of credit risk posed by the four business sectors most closely associated with our chosen industry:

  • Hardware, Building & Garden Supplies Retailing
  • Core Retailing
  • Residential Construction
  • Commercial Construction.

In our last Statswatch post (30 May - find it here), the April month’s data continued to show improvement in the risk profiles of our four business sectors, although CreditWorks’ Alan Johnston again underlined the need for vigilance when it comes to risk management.

May’s data suggests more of the same.

However, having said this, in late June CreditWorks is also reporting an increase in 60-90 day debt levels.

In the last month alone, reports Alan Johnston, debt exposure in 60 days has increased by 25%, and debt levels at 90 days have increased by 33%, or by $35 million in dollar terms.

This has also contributed to CreditWorks’ overall database currently seeing the highest levels of debt in its 20-year history.

“There is no doubt there is stress in all sectors of the market, with cost of living making a significant impact on debt repayment ability,” says Alan Johnston.

“While there appears to be considerable work currently in the building sector, a lot of building companies are struggling to finish work within reasonable timeframes, due to material shortages, supply lines, and access to progress payments.”

No coincidence then that a number of larger building franchises are predicting a major slowdown in the future, with forward bookings 12 months out looking bleak.

 


Now see the charts below for a visual explanation of the last three months’ risk profiles across our four chosen sectors.

The left axis indicates the % of a sector that is at risk. The bottom axis shows the % likelihood of failure over the next 18 months.

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