Close to three quarters of the nation’s top 200 corporations have just reported earnings results for the 2014/15 financial year, and CommSec chief economist Craig James says they’re finding it tough.
"It has been hard work for companies," he said.
The combined profits of the 143 companies that delivered annual numbers dropped by almost a third from the previous year, to $35.9 billion.
Miners and energy producers have been the worst off, due to plunging commodity prices, while some retailers and most property developers benefited from improving consumer spending and demand for housing, Mr James said.
Shareholders were the big winners, with most dividends maintained or increased due to the sound financial health of many companies, he said.
But the numbers show it is getting harder to bring in income.
"Corporate Australia is at the crossroads," Mr James said.
"Earnings have been hard to generate in the past year, and if anything this is likely to continue."
Australia's economy grew at a below-average rate of 2.3 per cent in the year to March, and the latest reading, due out on Wednesday, is expected to show a further slowing to 2.2 per cent in the year to June.
Major trading partner China is also stumbling, with growth at risk of falling below the targeted seven per cent.
"China is rebalancing away from production to consumption, but at the same time the Indian economy doesn't seem poised - at least not yet - to go down the Chinese path," Mr James said.
Company earnings reports also indicate many are satisfied with their position and are opting to increase rewards for shareholders rather than invest in future growth.
This could lead to more foreign takeovers, Mr James said, after Japan Post's $6.5 billion takeover of logistics giant Toll Holdings and the recently announced $8.9 billion deal for ports and rail operator Asciano by Canada's Brookfield infrastructure Partners.
For the share market, the prospect of modest earnings growth also indicates more trouble ahead as many stocks remain overvalued, he said.
THE BEST AND WORST 2014/15 EARNINGS RESULTS:
- Qantas rebounded from a $2.8b loss to $560m profit
- JB Hi-Fi beat expectations and forecast further growth
- Pacific Brands halved its loss and tipped more improvement
- Stockland's profit rose 71pct on strong demand for homes
- Seven West Media's huge TV writedowns caused a $1.9b loss
- Origin Energy to cut jobs as low oil prices caused $658m loss
- Fortescue Metals hit by iron ore's dive, profit down 88pct