Waterford Wedgwood, Glanbia, Ardagh and Qualceram are among the companies with sizable pension fund deficits following the collapse in equity market values in recent months.
According to a new report from Merrion Stockbrokers, all four firms have deficits on their defined-benefit pension schemes of more than 10 per cent of their market value.
Merrion analyst Mr Rory Gillen also suggests that the current low level of pension funding by Irish publicly-quoted companies is no longer sustainable in the current environment.
In February, the broker found that the average pension cost for Irish companies was just 3.9 per cent of total employment costs. Merrion estimates that this could be expected to rise to as much as 6 to 7 per cent as liabilities rise and asset values decline.
In overall terms, the broker does not believe that the effect on company pension funds of the equity downturn poses any serious threat to the Irish market.
While pension costs look set to rise, the impact on reported earnings in the majority of cases is not likely to be significant, Merrion says.
Mr Gillen notes that the Irish financial stocks, for instance, look to be in good shape with Bank of Ireland's defined-benefit pension scheme still showing a modest surplus, while Irish Life & Permanent's fund enjoys a significant surplus.
AIB's fund is showing a small deficit of less than 3 per cent of its market capitalisation, while its pension fund contributions, at 8 per cent of total employment costs, are among the highest in the market.
"I can't see a major impact. Insofar as it impacts on the Irish market, it is not a great problem but there are company-specific issues that have to be watched," Mr Gillen said.
In Waterford Wedgwood's case, its deficit of €113.4 million represents around 31 per cent of the company's market value.
Its pension costs, as a percentage of total employment costs, were just 2.1 per cent last year. If these costs were to rise to 5 per cent, it would represent around 13 per cent of next year's pre-tax profits, Merrion says.
However, the company told Merrion that the loss of the surplus and an increase in contributions had already been factored into its forecasts.
In Ardagh's case, the pension fund deficit equates to a significant 92 per cent of its market value. A rise in pension costs from 3.7 per cent at present to 5 per cent would knock around 5 to 6 per cent off profits, Merrion believes.
At food group Glanbia, the pension fund deficit of €52.6 million equates to 11 per cent of its market value. Its annual pension costs of €5.4 million represent just 2.2 per cent of total employment costs at present.
An increase to five per cent would affect profits by about 8 per cent, Merrion says.
However, Glanbia management has indicated that while pension costs will go up, it does not expect them to rise to 5 per cent.
At Qualceram, although the deficit represents 35 per cent of market value, management does not expect a material rise in pension costs, as recent redundancies are expected to reduce future liabilities.
