15 Big Companies that Aren’t Profitable
In this article, we will be taking a look at the 15 big companies that aren't profitable. To skip our detailed analysis, you can go directly to see the 5 big companies that aren't profitable.
Many people simply associate the worth of a company with the profits that it earns, as higher profits mean higher returns. This is why no matter what a company earns, there is pressure on consistent growth on sales and profits. Many people also believe that if a company continues to make losses year after year, its existence will be in doubt and it will have to declare bankruptcy. While this is true for most companies, there are some major exceptions, with perhaps the biggest exception being Amazon.com, Inc. (NASDAQ:AMZN). While Amazon.com, Inc. (NASDAQ:AMZN) was established in 1994, it wasn't until a few years ago that the company finally turned over a net profit, even though its sales continued to grow astronomically year on year. This seems a bit unbelievable for one of the biggest companies in the world through any metric, and yet, Amazon.com, Inc.'s (NASDAQ:AMZN) strategy was to make its name in the market by providing goods for the cheapest possible prices, even if making a net loss, to attract more and more customers and drive out competition, both of which it achieved significant success at.
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While the company is now among the biggest retailers in the world, and the biggest online retailer by far, it has also expanded its footprint from just being involved in online retailing and expanded to many other areas including cloud computing through Amazon Web Services, which is actually where it derives most of its profits from. This is because retailing generally has very thin margins, as evidenced by the least profitable industries in the world.
In fact, that is one of the reasons why companies may not be profitable and yet, still be investable. In fact, according to CNBC in 2018, investors were heavily involved in investing in non-profitable companies, such as Tesla, Inc. (NASDAQ:TSLA) though the electric car manufacturer has become profitable now, and Spotify Technology S.A. (NYSE:SPOT). In 2017, more than three-quarters of companies were unprofitable in the year prior to their listing, which again shows that investors prefer revenue growth and market share capture for companies over profits.
Tech companies have been a major reason behind this shift in profitability markers, as investors tend to believe more in tech companies, even if unprofitable. According to data by Ritter, of the tech companies that went public in 2017, only 17% were profitable, while over 43% of non-tech companies were profitable. However, tech did suffer its year or reckoning in 2022, with many top stocks collapsing spectacularly under the weight of heightening inflation and threats of a looming recession. This is also why tens of thousands of job cuts were made by some of the biggest tech companies in the world, even while making billions of dollars in net profit, in order to maintain not just sales growth, but operating profit growth in a year where operating costs continued to rise at record levels.
Of course, not all companies aim to make a profit, even if operating at a level where assets and revenues would be enough to sustain a small country. Many companies operate as non-profits i.e. their primary purpose is not to earn profit but to provide a social or public benefit. Certainly, the CEOs of these companies are compensated generously to fulfill their primary responsibilities. However, profitability is not the primary metric by which these companies gauge success. There are other entities, including state-owned companies, that fall into the category of being non-profitable despite their significant size. State-owned companies rely on government funding, or a combination of government funding and public shareholding in the case of publicly listed entities. These companies operate in industries that are considered essential, such as utilities or construction, ensuring the uninterrupted provision of vital supplies or services that would have detrimental effects on the country's economy if not provided.
The debate on whether privatization or deprivatization is better has raged on for decades, with privatization being said to result in more competition, higher quality and higher growth, while ensuring major companies are state-owned helps consolidate wealth in the government, but at the same time, ensuring continuity of service. This is why even in countries like the U.S., where privatization is king, the government does swoop in to bail out major companies that would have otherwise crashed and burned and would have a drastic impact on the economy, mainly seen during the 2008 financial crisis, which saw hundreds of billions of dollars in bailouts, including to companies which are among the biggest bankruptcies in American history.
To determine the biggest companies that aren't profitable, we headed over to Fortune 500 to evaluate the companies with the biggest losses in the list. Then, we ranked these companies based on their total revenues and assets, and calculated the average of these two criteria. So, without further ado, let's take a look at the companies which combined have revenues exceeding $1.1 trillion and assets exceeding $3.4 trillion, and yet have only lost money, starting with:
15. CPC
Total revenue (in billions): $30,021
Total assets (in billions): $30,392
Total losses (in billions): $-1,407
CPC is the largest loss making company in Taiwan. The energy giant is a state-owned corporation and recently selected Japanese engineering firm JFE Engineering Corporation for a $230 million construction of an LNG terminal in Taiwan.
14. Lu'an Chemical Group
Total revenue (in billions): $34,043
Total assets (in billions): $46,429
Total losses (in billions): $-272
There are several Chinese state-owned companies among big companies that aren't profitable, and Lu'an is one of the biggest coal companies in the Shanxi province.
13. Shanxi Coking Coal Group
Total revenue (in billions): $33,380
Total assets (in billions): $71,504
Total losses (in billions): $-427
Shanxi Coking Coal Group is a state-owned coal mining giant in China and is counted among the biggest coal companies in the country.
12. Siemens Energy
Total revenue (in billions): $34,036
Total assets (in billions): $51,098
Total losses (in billions): $-541
Siemens Energy is an energy company headquartered in Germany. While still a loss making company, there is some good news for Siemens Energy considering that record orders and strong sales resulted in a strong Q2 for the energy giant.
11. Tata Motors
Total revenue (in billions): $37,797
Total assets (in billions): $43,575
Total losses (in billions): $-1,536
One of the biggest car manufacturers in India, Tata Motors is part of the massive Indian conglomerate Tata Group. While not profitable in TTM, the company still recently posted its second consecutive profitable quarter and beat estimates as well.
10. China Datang
Total revenue (in billions): $34,700
Total assets (in billions): $130,691
Total losses (in billions): $-2,904
One of the biggest power generation companies in China, the state-owned company is one of the biggest companies that aren't profitable.
9. Credit Suisse Group AG (NYSE:CS)
Total revenue (in billions): $29,044
Total assets (in billions): $829,856
Total losses (in billions): $-1,806
Credit Suisse Group AG (NYSE:CS) used to be one of the most well-known banking giants in the world, but its fall from grace has been spectacular. After the recent major U.S. banking crisis which led to the collapse of Silicon Valley Bank, Signature Bank and the takeover of struggling First Republic Bank, the share price of Credit Suisse Group AG (NYSE:CS) fell dramatically, resulting in it being bought out by its rival UBS Group AG (NYSE:UBS) in a deal worth $3.25 billion.
8. Deutsche Bahn
Total revenue (in billions): $55,658
Total assets (in billions): $81,686
Total losses (in billions): $-1,088
The national railway company of Germany, Deutsche Bahn is responsible for maintaining one of the highest quality and most extensive rail networks in Europe. While Deutsche Bahn trains were stuff of legend for being on time, that has steadily declined over years, and the company is continuing to make losses year after year. A DB spokesman recently said "The current operational situation is not acceptable for us, travelers or railway companies."
7. U.S. Postal Service
Total revenue (in billions): $77,041
Total assets (in billions): $46,405
Total losses (in billions): $-4,930
An independent agency of the executive branch of the U.S. government, The U.S. Postal Service is one of the biggest employers of the country, with more than 650,000 employees and competes against some of the biggest courier companies in the world.
6. Korea Electric Power Corporation (NYSE:KEP)
Total revenue (in billions): $52,356
Total assets (in billions): $177,638
Total losses (in billions): $-4,645
Korea Electric Power Corporation (NYSE:KEP) is one of the biggest and most valuable companies in Korea. Korea Electric Power Corporation (NYSE:KEP) recently increased its prices by 5.3% to reflect a higher cost of generating electricity even as the company aims to transit to clean energy.
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Disclosure: None. 15 big companies that aren't profitable is originally published at Insider Monkey.
