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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.
Atlanta is Region’s International Hub
Additionally, Atlanta is a powerful hub through which major commerce flows to global markets or for distribution to the rest of the region. Two of Atlanta’s biggest companies benefit from this focus on global activity. For example, about 40 percent of Delta Airlines’ annual revenue comes from international flights, while Coca Cola’s products are sold in 200 countries, with its biggest markets in the US, Mexico, China, Brazil and Japan.
The Southeast report is the fourth in the ‘HSBC Spotlight on US Trade’ series of reports and analyses investigating the impact of international trade on publicly traded companies in key regions across the U.S.
About the HSBC Spotlight on U.S. Trade
Conducted by the Economist Intelligence Unit, the HSBC Spotlight on US Trade is a series of reports and analyses of publicly-traded companies in key regions across the US that investigate the relationship between international activity – specifically operations and sales - on company performance between 2007-2012. The reports are based on a sample of 259 publically listed US companies, in four sectors and five regions which were categorized as having high or low levels of internationalization. For more information or to download the full report, visit: https://globalconnections.hsbc.com/us/en/articles/southeast-report
Notes to editors:
HSBC Bank USA, National Association, with total assets of $183.9bn as of 31 March 2013 (US GAAP), serves 3 million customers through retail banking and wealth management, commercial banking, private banking, asset management, and global banking and markets segments. It operates more than 250 bank branches throughout the United States. There are over 165 in New York State as well as branches in: California; Connecticut; Delaware; Washington, D.C.; Florida; Maryland; New Jersey; Pennsylvania; Oregon; Virginia; and Washington State. HSBC Bank USA, N.A. is the principal subsidiary of HSBC USA Inc., an indirect, wholly-owned subsidiary of HSBC North America Holdings Inc. HSBC Bank USA, N.A. is a member of the FDIC.