At the beginning of 2018, the number of companies in difficulty reached 51% of the total number of impact companies, which reversed for the first time the balance between healthy companies and companies in difficulty, according to a study released on Thursday by the CITR Group.
Although the number of impact companies (with assets over one million euros) is increasing compared to the previous year, their 4% market share remains unchanged and their value as a share in the economy increases exponentially.
More than half of almost four million employees in Romania are working in impact companies.
At the beginning of 2018, 29,000 companies with assets of over one million euros were operating in Romania.
CITR Group study also shows that 4% of Romanian companies concentrate 79% of business and produce a turnover of EUR 237 billion, by 14% more compared to the previous year.
Anca Manitiu, CIT Restructuring CEO: „Year-on-year, we are seeing an increasing concentration of the market, in terms of turnover, around the impact companies. Although the share of small companies maintains at an overwhelming level of 96%, they have an ever lower impact. Their economic importance, given by their volume of business, is continuously diminishing, a dynamic leading to a stronger polarization of the business environment between impact companies and the rest of companies, but also to deepening gaps within the impact category, between fundable companies that perform increasingly better every day and those with difficulties, whose indicators are deteriorating.”
As a result of the CITR Group’s analysis, the average indebtedness rate maintains the increasing trend, the fixed assets have a weaker usage efficiency, and the working capital management, expressed by the collection of claims and stock movements, is slightly worsening.
The number of companies with an indebtedness exceeding 70% goes up to 43%, with most of them having an indebtedness ratio below 70%.
Regarding the Romanian economy, CITR Group specialists found that it is centred within the profitability ranges of 0% -20% and an indebtedness ratio of up to 50% with a debt recovery period of 70 days.
Vasile Godinca-Herlea, CITR CEO: „The Romanian business environment, after 30 years of market economy, looks like an engine that overheats. We are a country with a business supported by only 4% of all companies, and out of this small percentage, the majority (51%) are experiencing difficulties. The impact of maintaining an overwhelming number of impact companies within the difficulty area jeopardizes the stability of the community where they operate and the business ecosystem. The large share of their turnover they generate in the market increases their importance for the active population and the need for them to be healthy. Their small share and high degree of difficulty they manifest, through the analysed indicators, show us how vulnerable the Romanian business environment is.”
In terms of median profitability (net profit %), the most profitable sectors at the beginning of 2018 were health (about 10%), agriculture (9%) and hotel activities (8%). The IT industry generated median profitability of about 5%, while the manufacturing industry, which significantly contributes to sales, has median profitability of about 3%.
CITR Group specialists expect that in 2019 the number of companies in difficulty will increase, in the context of a sharp economic growth slowdown registered in previous years. „With the deepening current account deficit and budget deficit and inflationary pressures, we have signs that the structure of companies will change through an increase in the proportion of companies that can be restructured and insolvent companies. We expect a deeper polarization than in 2018, healthy companies will perform increasingly better and those with difficulties will experience a worsening trend, which, in conjunction with macroeconomic changes, will create significant risk factors for the next period. We may witness an increase in imbalances,” the CITR Group experts announce.
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