Texas Companies with High Internationalization Levels Enjoy Higher Profit Margins

  Texas Companies with High Internationalization Levels Enjoy Higher Profit
  Margins

  **HSBC Spotlight on US Trade: Texas highlights correlation between global
                activity and stronger financial performance**

Business Wire

NEW YORK -- July 11, 2013

Texas companies with high levels of global sales and operations generally
outperformed less internationally-focused Texas companies in the last six
years, according to a new report by HSBC Bank USA, N.A. (HSBC).

Findings from the report, ‘HSBC Spotlight on US Trade: Texas,’ show that
highly international Texas-based companies in the years 2007-2012 had five
times higher average profit margins (five percent) than their
low-international counterparts (one percent). This was even more dramatic than
the national average which showed that highly internationalized companies
outperformed low international companies nearly three to one. Companies in
four sectors – consumer goods, healthcare, industrials, and information and
communications technologies (ICT) – also followed the same trend.

The HSBC report analysed the level of overseas sales and operations at top US
publicly listed companies based in Texas and across the nation to understand
the impact of internationalization on business profit margins by region and
select sectors.

When comparing profit margins just in terms of international sales, the
difference between Texas companies with higher international sales and those
with low international sales is even more striking. The findings show Texas
companies with high international sales had an average profit margin of seven
percent in the last six years, compared with less than one percent at Texas
companies with low international sales.

“This report highlights what we see consistently with our clients, that there
is a positive correlation between international trade and higher profit
margins,” said Lori Vetters, Senior Vice President, Texas Area Director,
Middle Market, for HSBC Commercial Banking in the US. “Clearly, many Texas
companies have benefited from international commerce and are seizing global
trade opportunities to thrive.”

Texas is the nation’s leading export state for the11th year in a row with
over $265 billion in merchandise exports in 2012, and more than one-quarter
(28 percent) of all manufacturing jobs in the state are export-dependent,
according to the US Commerce Department. However, the HSBC report shows that
compared to other regions, Texas companies had the least internationally
oriented operations.Only 31 percent had operations abroad and only 19 percent
had employees abroad.

Greater international business leads to increased resiliency

The report also found that higher internationalization rates contributed to
greater profit margins for Texas businesses during the recession and
following, and were correlated to faster rebounding and sustained profit
margin increases.

In 2007, Texas-based companies with high internationalization rates had just
slightly higher average profit margins (six percent) than their
less-internationalized peers (four percent). However, by 2011, in the wake of
the recession, profit margins at highly internationalized companies in Texas
rose to eight percent, while profit margins at their less international peers
stayed in the red until 2012.

“Many globalized Texas companies avoided the worst of the recession because
they had diversified their end markets, some to higher growth economies.This
can help insulate a company’s viability during challenging economic
conditions,” said HSBC’s Vetters. “With US domestic growth still sluggish,
more Texas businesses might want to look for opportunities to capture the
benefits of overseas markets.”

For example, HSBC client Fossil, the Richardson, Texas-based watch company,
used global demand to carry itself through the recession. Sixteen percent of
its sales in 2012 were from Asia. Fossil began acquiring distributors in
Taiwan in 2005, and later forming subsidiaries in Shanghai, India, and Korea.

Major Sectors Show Same Positive Impact of Internationalization

Texas is dominated by companies in the industrial and ICT sectors. According
to the findings, highly internationalized industrial companies across the
nation had an average profit margin of six percent, or nearly double the
average profit margin of low international industrials (three percent). In the
ICT sector, companies with a high level of internationalization had an average
profit margin of nine percent, seven times higher than those with low level of
internationalization (two percent).

About the HSBC Spotlight on US Trade

Conducted by the Economist Intelligence Unit, the HSBC Spotlight on US Trade
is a series of reports and analyses of 259 publicly listed US companies, in
four sectors and five regions, across the US. The reports look at the
relationship between international activity – operations and sales – on
company performance for the years 2007-2012. For more information or the full
report, please see us.hsbc.com/spotlight.

Notes to editors:

HSBC Bank USA, National Association, with total assets of $183.9bn as of 31
March 2013 (US GAAP), serves 3 million customers through retail banking and
wealth management, commercial banking, private banking, asset management, and
global banking and markets segments. It operates more than 250 bank branches
throughout the US. There are over 165 in New York State as well as branches
in: California; Connecticut; Delaware; Washington, D.C.; Florida; Maryland;
New Jersey; Pennsylvania; Oregon; Virginia; and Washington State. HSBC Bank
USA, N.A. is the principal subsidiary of HSBC USA Inc., an indirect,
wholly-owned subsidiary of HSBC North America Holdings Inc. HSBC Bank USA,
N.A. is a member of the FDIC.

Contact:

Media inquiries
HSBC
Laura Powers, 212-525-0115
laura.s.powers@hsbc.com
 
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