S&P 500 companies with full reporting information posted 46.6 per cent of their sales from outside of the US in 2012, up from the 46.1 per cent reported in 2011, 46.3 per cent reported in 2010 and on par with the 46.6 per cent posted in 2009, according to research published by S&P Dow Jones Indices.
The data is derived from the 264 companies within the S&P 500 that have full reporting information.
“While the percentage of foreign sales posted a small increase in 2012, reversing last year’s slight tick downward, the underlying trend remains the same − S&P 500 company sales in Asia continue to increase while European sales continue their decline,” says Howard Silverblatt, S&P Dow Jones Indices’ senior index analyst and author of the report. “Even though Europe still accounts for more sales, the gap between Europe and Asia is diminishing.”
According to the report, sales to European countries declined to 9.7 per cent of all S&P 500 sales in 2012, down from 11.1 per cent in 2011 and 13.5 per cent in 2010. The UK decreased to 1.7 per cent of all sales in 2012 from 2.4 per cent in 2011.
“European ex-UK sales fell to 8.0 per cent in 2012, from 8.7 per cent in 2011 and 12.0 per cent in 2010, representing the greater impact of the European recession on US issues,” adds Silverblatt.
On a country by country basis, Canada remained the top declared country for foreign sales − accounting for 4.1 per cent of all S&P 500 sales, down from 4.3 per cent in 2011 and representing 8.8 per cent of all foreign sales, down from 9.3 per cent in 2011. Japan improved to 1.0 per cent of all S&P 500 sales, up from 0.7 per cent reported in 2011 and 0.5 per cent 2010.
Looking at sectors, information technology continues to dominate with over 58.3 per cent of its declared sales coming from outside of the US, up from 56.5 per cent reported in 2011, as Financials continued to decline to 30.0 per cent, down from 34.7 per cent in 2011.
S&P Dow Jones Indices also determined that the percentage of income tax paid to foreign entities decreased 1.8 per cent in 2012 as US payments increased 24.2 per cent with S&P 500 issues sending a cumulative USD139bn to non-US governments and USD146bn to the US government.
“In 2012, S&P 500 issues returned to paying more income tax to the US government than to foreign countries, reversing a two year trend,” says Silverblatt. “Washington received 51.2 per cent of income taxes paid in 2012, up from 45.3 per cent in 2011. The 48.8 per cent paid abroad is substantially down from 60.6 per cent in 2005.
“At this point it is not just about tax rates and credits, but in what domain the sales and profits are registered in. Tax policy has now become a major issue with the public debate expected to grow substantially, emulating the levels and political turmoil which surrounded the healthcare debate.”
An initial review of the data by Silverblatt shows that S&P MidCap 400 issues have less exposure to foreign sales than large-cap issues, with S&P SmallCap 600 issues having even less exposure. Sector variance revealed that mid- and small-cap issues had slightly higher concentration in healthcare and less in information technology and finance.
“Top-line foreign sales exposure seems to reduce with size, but bottom-line income may be a different story. Large-caps may be able to control more of their fate through ownership, joint ventures and the ability to hedge currencies to protect costs. Smaller-caps appear to have to go with the flow more − so if they are currently importing component parts from Japan, they are saving a few cents,” says Silverblatt.