Rise in 'Zombie Companies' Threatens Australian Economy

According to data from big four accounting firm KPMG released on Monday, there has been a disconcerting rise in ‘zombie companies’ in the wake of the economic downturn rocking Australia.

In the past six months alone, the number of publicly-listed companies entering the ‘zombie’ zone has increased by 51 per cent. “There’s a growing trend of them,” Ms Dickerson told news.com.au. “There are more companies falling into this bucket.”The average market cap of a zombie company - which is the number of shares multipled by their price - has increased from $20 million to $24 million, meaning bigger companies are facing financial woes.

“Imminent breaching of loan covenants, having to manage supplier payments to sustain cashflow, significant tax arrears or having a large portion of debt maturing soon while also underperforming are telltale signs a company is perpetually struggling,” Ms Dickerson said. For the natural resources sector, she said massive geopolitical events such as the Ukraine-Russia war and the recent conflict in Gaza had caused key materials including petrol to become more expensive and had a major impact on supply chains.

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