The SEE TOP 100 list presented here, which was prepared by Bulgarian business news portal www.seenews.com, still reflect the good times of 2008. Still, the company landscape as shown in the list is rather bleak. The top positions are almost completely taken by oil companies, mostly fuel traders. They are followed by electricity companies still coping with EU directives, often not fully privatized and usually in a more or less monopolizing position within their respective markets. Add to that a number of retailers, subsidiaries of the multinationals, telecommunications companies (again mostly owned by international companies) and a few surviving ex-socialist metallurgical “kombinates.” Not very sexy stuff – at least until we look at the growth figures. A vast majority of the companies on the list managed to increase their revenues in 2008; in fact growth was two-figured for two thirds.
Typical examples were the fuel companies, which fill out not only the top of the regional list but also lead the national top companies lists from Slovenia to Moldova. Their revenues skyrocketed in 2008. This growth was fueled by overall favorable business conditions (at least until November) and record high oil prices. Giants like Romania’s Petrom – the largest company in the region – managed to increase their revenues by 35 percent or more. The 2009 slump mirrors last year’s situation: the recession brought lower volumes while oil prices in the global markets are far below last year’s record levels. Petrom’s revenues in the first half of 2009 fell by 28 percent. Profits halved – EBITDA went from 2.5 billion to 1.2 billion Euros. The company, which is controlled by Austria’s OMV group, laid off almost 5,000 employees.
Petrom still makes decent profits, and is making further investments to secure its position as the region’s top gas and oil company. But many other large Balkan fuel traders and refineries already ended last year in a losing position. Croatian group INA, which is now in the hands of Hungarian oil company MOL, made 142 million Euros of loss. INA’s 2009 sales went down by 26.7%. Serbian oil company NIS was sold early this year to Russian Gazprom Neft in a deal which wasn’t without controversy: the sales price of 400 million Euros was perceived by many analysts as too low. The revision made by KPMG after the sale showed a loss of 86 million Euros in 2008. Another Russian investment, the largest refinery in the region, Lukoil Neftochim in the Bulgarian port of Burgas, posted the highest loss – 242 million Euros. The Russian group doesn’t publish interim report for their subsidiaries, yet it’s hardly unlikely that its Balkan operations fared better than the group itself: its profits halved and its revenues went down from 35.9 to 24.8 billion Euros in the first half of 2009. The main competitor of the Russians in the region is the Austrian group OMV: again no 2009 data has been published for their individual companies (apart from Petrom), yet the group’s sales shrank by almost 35 percent from 12.9 to 8.4 billion Euros.
Electricity companies also don’t publish interim financial reports. One of the few is Croatia’s Hrvatska elektropirvreda, which increased its revenues by 17.3 percent, or 461 million Euros, in the first quarter.
While the oil industry has been hit severely by the crisis, the situation is much gloomier for regional steel producers. The largest is Arcelormittal Galati. The production of Romania’s biggest exporter and its only large steel mill dropped to one third in 2009. In July production reached 100 million tons – far from the 300 to 350 million of the company’s heyday. The Galati mill made some 2,000 employees redundant. US Steel’s company in Serbia also announced layoffs in July after switching to a 32 hour working week earlier this year. The leading Bulgarian steel manufacturer is Stomana – an important part of the Greek Sidenor group. The group reported a 37 percent drop of revenues in 2009 and announced a number of anti-recession measures in its interim report.
Non-steel metallurgical companies face a slightly better situation. The German copper producer Aurubis is expanding its Bulgarian facilities and plans to invest some 15.3 million Euros until next September. Romania’s ALRO – the largest aluminum smelter in Central and Eastern Europe – lowered its production by 25 percent in the first half of 2009. As the price of raw materials dropped, ALRO lost 36 percent of its sales revenues, and its management had to lay off 592 people. Yet as the Romanian company enjoys favorable energy prices, largely secured by a medium term contract, its financial situation is far from being critical. ALRO’s owner is the international group Vimetco with offices in Switzerland and Netherlands: it stressed its commitment to further develop the business in Romania.
Few companies on the SEE TOP 100 list are actually producing something other than raw or semi-raw materials. Yet interestingly enough, those few are performing exceptionally well. Romanian carmaker Dacia is owned by French car producer Renault. Renault’s 2009 performance is mixed: the group lost 16.5 percent of its revenues yet it fared better than most of its competitors, with Renault slightly increasing its market share. Dacia, however, increased its production by 20.2 percent in the first half of the year. The company churns out 1,350 Logan and Sandero cars every day, with 85 percent sold outside Romania. Dacia even presented a futuristic concept car with low fuel consumption and greenhouse gas emissions – a joint project of design centers in Romania and France.
Renault is the number one car maker in Southeastern Europe with two plants – one being Dacia and the second Revoz in Slovenia. The Slovenian factory produces some 200,000 Twingo and Clio II cars a year. After slowing down in the first quarter Revoz is again operating at its full capacity; this is largely because small and economy cars are en vogue again, even as measures taken by various governments to revitalize the car market take effect.
Another industry that is doing well is the pharmaceutical business. The top regional players are Slovenian companies Krka and Lek, with the second being part of Sandoz’s Novartis group. The Krka Group, meanwhile, is one of the few companies which have managed to increase not only its revenues but also its profits in 2009: the increase of a meager 2 percent indicates stellar performance in times of recession. Two other segments where it is safe to assume that the slump was at least not as dramatic as in oil or metal are retail and telecommunications. Most companies operating in these two segments are in the hands of large multinational groups and don’t publish interim reports. Those few that do publish figures during the year mostly show a modest increase of sales.
The picture given by the SEE TOP 100 is to some extent distorted by the fact that there’s no consistency in publishing consolidated group results. In some cases these results are published – in many, though, only the parent company is present on the list whereas the consolidated group results are missing. A typical example is the retailers. For example the list publishes the data for Slovenian company Mercator (1.8 billion Euros) – though the Mercator group is present throughout the region and has much bigger revenues (2.7 billion). In the case of Croatian retailer Konzum and Serbia’s Delta M the gap is even bigger. Konzum (ranked 12 with 1.7 billion Euros) is a part of privately owned group Agrokor with revenues of 3.8 billion. Delta M (ranked 15 with 1.5 billion Euros of sales) is a part of Serbian Delta holding and had revenues slightly below 3 billion Euros.
The most important activity of both holdings, Delta and Agrokor, is retail – yet they are also active in a number of other areas. And both are owned by so called tycoons: Agrokor is in the hands of the richest Croatian, Ivica Todorović. His friendly relations with the Croatian governing HDZ party are also reflected in the fact that Agrokor is the leading receiver of various Croatian state subsidies. Even though Todorović boasts of running a large international company, Agrokor is active mostly on the Croatian market.
Delta is owned by Miroslav Mišković, the richest Serbian. Both companies are silent about their 2009 performance. The local press, however, reports that both holdings are in deep financial troubles. Agrokor’s debt to suppliers amounted to almost 7.13 billion Croatian Kunas this year – almost a billion Euros. There are only rumors about Delta’s problems yet some local reports hint that Mišković may soon sell its Delta M retail chain.
Again, this is just more proof that when it comes to Balkan business, there’s often more to a picture than meets the eye. So even if the SEE TOP 100 survey would include missing data like the consolidated figures for these groups, it would still show an unusual company landscape. To some extent this is correct – business in Balkan countries isn’t exactly business as usual. For one thing, the transition isn’t over yet – hence the strong presence of more or less transformed and privatized giants and monopolists from the past on the list. Again, with the exception of Dacia and Gorenje there are almost no locally-developed yet internationally present brands found on the list. And very few companies from the list produce more complex stuff then raw materials or energy, such as cars or drugs. This doesn’t do justice to the local entrepreneurial spirit and very strong potential for innovation; to spot really exciting new Balkan companies one should look outside the list.
