asked the Minister for Industry and Commerce if he will explain the wide disparity in the average profitability of Irish manufacturing companies in comparison with non-Irish ones operating in this country, as indicated in the Industrial Development Authority's statistical profile of the Irish manufacturing sector and in particular, the way in which the pending Companies Bill will effect improvements in the position of Irish companies; and if he will make a statement on the matter.
Written Answers. - Profitability of Manufacturing Companies.
34.
There are many factors contributing to the disparity in profits between Irish manufacturing companies and overseas companies operating within Ireland. This disparity reflects a number of variables, including management capability, the type and quality of the products made and processes used, the capital intensity of the operation etc.
Irish industry is concentrated in sectors with traditional low average profit margins with many firms producing undifferentiated price sensitive products. This contrasts with the position of overseas companies which are heavily concentrated in high profit sectors, like pharmaceuticals, office equipment and data processing, and produce goods which can command a price premium, due to their superior quality, technology and marketing. Similarly with processes, the level of technology employed is generally much higher in overseas firms than in their Irish counterparts. The use of efficient up-to-date production processes helps to reduce costs and so increase profits. The other major factor influencing profitability is productivity where output per head in overseas companies averages IR£81,000 as compared with IR£64,000 per head in Irish companies.
I do not see the Companies (No. 2) Bill, 1987, as affecting the profitability of one class of company as opposed to another. The aim of the Bill is rather to create a climate of confidence for business activity in which genuine commercial endeavour will prosper. By giving greater protection to investors and creditors all companies can benefit and economic development generally can be enhanced.