Large corporations with billions of dollars in revenue are built to make billions of dollars for their investors and stakeholders. Unless, of course, they don’t? It’s not uncommon for something to appear counterintuitive. However, as an analysis of organizations with more than $12 billion in revenue that were featured on the Forbes Global 2000 list of the world’s largest companies revealed, the reasons for why enormous companies that are losing money are kept alive differ.
According to the most recent annual data as of April 2022, the coronavirus epidemic is still doing havoc on several of last year’s major losses. This includes Air France-KLM Group, which lost $3.9 billion in a single year, or 23% of its nearly $17 billion in yearly revenue. Another example is East Japan Railway, which has lost 19 percent of its revenue. Cruise lines were affected much harder, losing multiple times their yearly revenues, but were excluded from the table due to their lower overall revenues of $1.5 billion (Royal Caribbean Group) and $3.5 billion (Cruise Lines International) (Carnival Corporation).
Tech companies are an even more intriguing example of corporate money traps. These are typically given large sums of money from investors who are betting big on these creative businesses becoming (very) profitable in the future. In a global comparison, Chinese tech behemoths have the largest financial voids. Kuaishou, a video sharing company, lost almost as much money as it made last year ($12.6 billion). Didi, the country’s largest ride hailing company, and Meituan, the country’s largest delivery company, both failed to make a profit despite becoming staples of the country’s urban life. The Chinese government’s anti-technology crackdown has proved a further setback for internet corporations.
Legacy firms are a third type of company that is losing a lot of money. Last year, Atos, a French IT firm, Cheniere Energy, situated in Texas, and Gruppo Tim, formerly Telecom Italia, were all affected. The reasons for massive losses are more company-specific for them. Atos attributed their massive loss to an unexpectedly increased cost tied to a U.K. outsourcing contract, project “slippages,” and customer and payment postponements. Gruppo Tim stated it was struggling with goodwill impairment and a substantial write-off of deferred tax assets. Finally, despite its burgeoning liquefied natural gas operation last year, Cheniere Energy lost a lot.According to industry insiders, the company sells its liquefied gas at set pricing, but the natural gas it buys and processes is susceptible to price changes. When the price of fossil fuels skyrocketed in 2021, the corporation began to burn cash instead of gas.
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