The number of Australian companies receiving warnings from auditors about their financial health has jumped to a higher level than that seen during the global financial crisis, new research shows.
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Auditors last year flagged issued "going concern" warnings to one in three companies listed on the Australian Securities Exchange, an analysis of eight years worth of company reports from CPA Australia reveals. By comparison roughly one in five companies received similar warnings during the height of the GFC.
The report charts an increase in going concern warnings since 2011 has been concentrated among middle and bottom ASX-listed companies with the sharpest rise in Australia's energy and mining sectors, where more than 40 per cent of companies were judged at risk in 2013.
The news comes as mining companies are under increasing pressure from falling commodity prices, with iron ore on Monday night hitting a five-year low.
Stephen Potter, director of strategic planning at global mining giant Vale, told a Melbourne mining conference on Tuesday that the decline in iron ore prices had made "everyone nervous".
BHP Billiton also announced plans on Tuesday to cut 700 workers from its Queensland metallurgical coal business, BMA Mitsubishi Alliance, representing about 8 per cent of BMA's 6000 full-time staff. That fresh round of job losses comes after 173 jobs were cut from BHP's Mt Arthur thermal coal operations in New South Wales' Hunter Valley in July.
In the coal sector alone, about 12,500 jobs have now been cut over the past two years amid a string of mine closures and delays to projects by companies including BHP, Rio, Glencore, Vale and Peabody Energy.
Laboratory testing group ALS - which provides testing and analysis services for numerous companies - has also this week revealed plans to cut up to 1000 jobs.
"We've been talking about the potential impacts of the slow-down in China, the strength of the Australian dollar and the effects of the tapering mining boom on the economy for some time," CPA Australia chief Alex Malley said.
"Now, this report … 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?" he said.
It comes as large falls in commodity prices, competitive pressures on manufacturers, and weaker economic conditions continue to bite hard on a large cross-section of Australia's listed companies.
New consumer confidence figures also released on Tuesday showed sentiment remained soft as the CPA research showed consumer staples, industrials, health care and utilities all experienced an increase in going concern warnings last year.
The analysis covers the audit reports from PricewaterhouseCoopers, Ernst & Young, KPMG, Deloitte, BDO, Grant Thornton, HLB Mann Judd, among others.
It represents 98 per cent of the companies listed on the ASX over the period 2005-2013. It shows the percentage of going concern warnings to the smallest 500 companies jumped from 19 per cent in 2007 to 58 per cent in 2013.
The percentage of similar warnings going to middle companies jumped from 17 per cent in 2009 to 28 per cent last year.
But the fortunes of Australia's largest companies have been much better, with the percentage of warnings going to top 200 companies declining from 7 per cent in 2009 to just 1.5 per cent in 2013.
However, the CPA report shows the financial sector reported the lowest percentage of going concern warnings last year.
"Australia's financial industry has been marked with the stable financial system and most profitable banks in the world," the report says.
With Amanda Saunders
