KPMG Financial Performance Index (KPMG FPI)

After declining 0.8 percent in 3Q23, global corporate financial performance enjoyed a rebound in 4Q23, with KPMG FPI scores rising from 90.74 in 3Q23 to 91.20 in 4Q23. 

Utilities sectors experienced the strongest growth in the quarter with FPI score rises of 0.37 percent respectively. Strong performance is also recorded in the Electric Utilities subsector with the rise in FPI score of 2.51 percent in 4Q23.

On an annual basis, the Raw Materials and Natural Resources sector, is among the strongest growing sector (up 1.4 percent). During the same period, the greatest decline in scores were experienced in the Agriculture and Husbandry sector (down 2.5 percent) and the Biotechnology sector (down 2.4 percent year-over-year).

In the fourth quarter of 2023, different regions experienced varying performance in their sectors. Here is a breakdown of the regional comparisons:

• Africa: The Travel and Hospitality sector showed strong performance, with a score increase of 1.16 percent. On the other hand, the Business Services sector was the weakest performer, experiencing a decline of 9.20 percent.

• Asia: The Utilities sector enjoyed a notable increase in score of 0.75 percent, while the Infrastructure and Real Estate sector was the weakest performer, declining by 2.57 percent.

• South America: The Technology and Telecommunication sector performed well with increase in score of 3.57 percent. However, the Travel and Hospitality sector experienced a decline of 7.61 percent, making it the weakest performer in the region.

• Europe: The Industrial Conglomerates sector’s average score increased by 1.23 percent, while the Media and Entertainment sector declined by 11.79 percent.

• North America: The Media and Entertainment sector score increased by 0.69 percent, while the Pharmaceuticals sector was declined by 11.88 percent.

• Oceana: Overall, Oceania faced the most distress, with 16 out of 24 sectors reporting a KPMG FPI score below 90. This was primarily due to declining performance in the Life Sciences Tools and Services sector (58.30), Pharmaceuticals sector (73.72), and Chemicals sector (78.94).

Zombies are companies close to default (scoring 0 on the KPMG FPI) for three or more consecutive quarters.

The number of zombies decreased 10.6 percent this quarter (from 1,300 in 3Q23 to 1,162 in 4Q23). While this is a good sign, it is worth noting that – year-over-year – the number of zombies has approximately doubled (from 2,558 in 2022 to 4,615 in 2023). Many of these companies may already be experiencing distress or working through restructuring strategies.

In 4Q23, the sectors with the highest proportion of zombies included Raw Materials and Natural Resources (194), Technology and Telecommunication (173) and Biotechnology (138).

The KPMG FPI distills a range of market and financial performance indicators into a single index covering nearly 40,000 public companies around the world.

The index scores companies on a scale of zero to 100, with zero indicating serious distress and 100 being best performing.

Since many companies tend to perform well for most of their lifespans, there is a natural bias towards a higher quartile score. As such, around 80 percent of the companies in our index score between 85 and 99.

As the KPMG FPI is a logit model, a drop below the average can very quickly lead to an index score of zero.

When exploring this data, therefore, readers should consider:

• The absolute score (0 to 100)
• Comparisons across geographies
• Comparisons across sectors
• Relative performance against peers
• Trends over time
• Macro events which are driving trends
• Expected macro events which may affect future scores

Read more about our methodology

Africa emerged as one of the best-performing regions with a KPMG FPI score of 90.32.

Oceania and Europe experienced a decline in FPI scores, falling by 6.22 percent and 2.93 percent respectively.

An analysis of the KPMG FPI country data indicates that, over 2023, the largest gains in KPMG FPI scores were experienced by companies headquartered in Canada (36.57 percent), Pakistan (11.34 percent) and Vietnam (9.23 percent)

Those headquartered in Australia, Sweden and Indonesia saw a decline in average KPMG FPI scores over the year, falling by 10.80 percent, 9.70 percent and 6.00 percent respectively.

The KPMG Financial Performance Index measures the financial health of individual companies. Based on an initial pool of more than 40,000 companies globally, KPMG FPI identifies those companies, sectors, regions, countries and territories that are performing well and those that are underperforming. A higher score on the KPMG FPI represents strong performance.

The KPMG FPI model draws from the Logit Probability to Financial Default model (developed by John Campbell, Jens Hilscher and Jan Szilagyi), which is based on eight explanatory variables encompassing financial and market variables, to arrive at the overall financial health of a company. The KPMG FPI is based on raw data from S&P Capital IQ database.

We release our insights publicly every quarter. However, the model can be run on any given day to reflect live market changes, so please reach out to your local KPMG member firm or contact us at in-fmkpmgfpi@kpmg.com if you would like additional information.