Business Advantage PNG‘s exclusive annual survey of Papua New Guinea’s major companies indicates a change of mood after a disappointing 2014, with profit and recruitment expectations up for the year ahead.

This is now the fourth consecutive year Business Advantage PNG has run the PNG 100 CEO Survey—its exclusive survey of the executives in PNG’s largest companies.

Designed to gauge business confidence, the survey seeks to uncover profit, investment and recruitment expectations for the coming year.

It also encourages PNG’s leading businesses to identify the key issues they face.

Profits below expectations in 2014

Our survey first of all asked CEOs how their profit results in 2014 had measured up to their expectations.

The responses suggest the downturn recorded in our last survey clearly continued throughout 2014, with 44% of respondents reporting profits were short of expectations, a similar figure to last year’s survey.

Moreover, 12% reported a ‘substantial’ drop in profits, compared to last year’s 15.6%—a very slight improvement.

While some companies saw an improved profit situation in 2014, fewer CEOs reported profits ahead of expectations: just 20%, compared to over a third (37.5%) in 2013.

Perhaps companies are getting used to the new economic realities, or least are able to make more accurate predictions: some 36% of CEOs told us profits met expectations during 2014, the highest figure since our survey began four years ago.

Higher confidence for 2015

While there were disappointments in 2014, there is confidence that 2015 is going to be better.

Some 56% of respondents said they expected profits to be higher in 2015, up from 43.7% last year.

This is a similar level of business confidence to two years ago, before the post-PNG LNG construction slump hit PNG.

Meanwhile, the number of CEOs expecting a drop in profits has never been lower since our survey began in 2012. Just 8% expect profits to fall in 2015, compared to 22.1% for 2014.

Just over a third (36%) of CEOs surveyed expect profits to be the same in 2015 as they were in 2014.

Investment and employment intentions

How much a business intends to invest, and how many people they intend to employ, are two other useful indicators of their confidence in economic conditions.

The PNG 100 CEO Survey is designed to capture investment and employment intentions in PNG’s largest companies over the coming year and it is in these two areas where we see a marked difference between this year’s survey and last year’s.

Our survey indicates there will be more business investment by PNG’s larger companies in 2015 than there was in 2014.

Just over half of respondents—52%—said they were planning to increase their investment in plant, equipment and other assets during 2015, up from 40% last year.

However, there is still some budget trimming going on, with some 32% saying they planned to reduce investment (a similar figure to last year, when 28.2% said they were planning cuts).

Either way, change is in the air—only 16% told our survey they intended to invest a similar amount in 2015 as they did in 2014.

More jobs coming

We asked PNG’s leading employers what level of recruitment they were planning in 2015, and the answer suggests further optimism.

Last year, almost 30% said they were planning to cut their workforce. This year, just 12% said the same thing, suggesting the job-shedding that occurred in PNG during 2013/14 may be coming to an end.

Indeed, some 60% of CEOs told us they were planning to increase their headcount in 2015—about double the number in last year’s survey and the biggest number across the four surveys we have conducted since 2012.

If those plans become reality, that’s good news for PNG’s job seekers.

Issues affecting business

The issues facing PNG’s largest companies have changed little over the four years we have conducted our survey, although the top issue has changed each year until now. In 2012, at the peak of the PNG LNG construction boom, it was the skills shortage. In 2013, it was security and law and order. In 2014, with its greater focus on productivity, the top concern was unreliable state utilities.

This year, security and law and order is back as the top issue facing business, suggesting PNG’s leading companies are not seeing progress on this critical issue.

Unreliable utilities, while this year’s second top issue, are seen as marginally less critical in this year’s survey.

Meanwhile, the lack of government capacity to deliver services and implement policy has risen in the perception of our CEOs, and is now third on our ‘critical issues’ list, compared to sixth last year.

* The PNG 100 CEO Survey 2015 was conducted by Business Advantage International between late November 2014 and early February 2015. The survey included senior executives from a representative sample of Papua New Guinea’s largest companies, across all sectors of the economy.