Companies are seeking solutions to escape tough times, such as innovation of products and services
A deteriorating economic situation across Central Europe combined in 2013 with an increasingly uncertain geopolitical situation to drive revenue stagnation for many of the region’s largest companies.
For the third year in a row more companies in the Central Europe have reported declines on their revenues, reflecting the economic slowdown of the region. And company results from the first quarter of 2014 indicate that for a high proportion of these, stagnation has this year transformed into actual decline.
This is the headline finding of the eighth annual Deloitte CE Top 500 report, which charts a steadily worsening economic and business situation across Central Europe to leave little room for optimism relating to the financial outlook of its largest companies over the next few months.
Beyond the gloomy situation, Deloitte report observes also achievements, in company’s making efforts for solutions. Countries of the region are turning away from a focus on low-cost labour to become knowledge-based economies driving the innovation. Many companies are now focusing on product and service innovation to attract the investment they need. Such positive practices appear set in the longer term to have a wide impact on many facets of their competitiveness and market position driving more positive prospects for the long term future.
For the eighth time Deloitte conducted an analysis of the largest companies in 18 countries of Central Europe and Ukraine (500 companies, 50 banks and 50 insurance companies). The combined revenues of all the companies in the Top 500 Ranking amounted to 712 billion euros, which represents a decrease of 0.4 percent (3 billion euros) compared to the result of 2012. Flat average revenue increase of 0% was noted across the region, down from a far healthier 3.3% a year earlier.
The decrease in revenues was recorded by almost half of the 500 companies analyzed by Deloitte. 227 among the 500 list reported decrease in their revenues for 2013. The situation has worsened notably, compared to only 97 companies with falling revenues registered in 2010.
According to Deloitte rating, unstable situation in Ukraine and recent economic sanctions can further contribute to the deterioration of economic conditions in the region, resulting in a further slowdown in the development of the largest Central European companies.
The largest increase in revenue in 2013 was recorded by manufacturing industry, nearly 3 per cent. It resulted mainly from the good condition of the automotive industry. Over the last year, several global companies from this sector started further investing in Central Europe (including Romania, Slovakia, Poland and Hungary). Despite investments, automotive industry was also positively influenced by increase of exports.
The consumer goods sector grew by only 1.1 percent. Last year, it was up 4.8 percent. Industry TMT (technology, media and communication) from several years affects the decline in average income (in 2013 -4.9 percent.). Sector, which for the second year in a row saw the biggest drop (-15.7 per cent.) is the real estate and construction industry.
Deloitte also analyzes the banking and insurance industries. In 2013, total assets of the 50 largest banks increased by 2.8 per cent, against an increase of 6.6 percent in 2012. 29 financial institutions reported an increase in assets (previous year: 37). The median growth for all 50 banks from the list amounted to 1.3 percent and was lower than last year’s increase of 4.9 percentage points. Just like last year, the largest representation among banks has Poland, whose participation in the list is 30 percent, followed by Czech Republic and Hungary, with 14 percent.
In 2013, average decrease in gross written premiums for insurers amounted to 0.8 percent. This means a further decline compared to 2012 and a reverse trend from 2011, when the growth rate was 1.5 percent. The sum of gross written premiums declined for the companies included in the ranking by -3 per cent, reflecting the stagnation in the sector. /IBNA/