By Nevena Krasteva
Amid global lockdowns and a steep economic downturn, companies in Southeast Europe (SEE) booked only a modest decline in sales, but profits collapsed. Oil companies and car makers, the traditional leaders in the ranking, bore the brunt of the Covid-induced crisis as shrunken consumption, travel restrictions and disrupted supply chains ate into their bottom lines. At the winning end, retailers posted double-digit revenue growth, riding the wave of e-commerce. Pharmaceutical companies too fared well as sales volumes surged.
Against the bleak backdrop of the Covid-induced global economic slump, the combined revenue of the SEE TOP 100 companies dropped by 7% to 120 billion euro, compared to record high 129.3 billion euro booked by the participants in the ranking a year ago. While the decline in the revenues of the biggest companies in the region was modest, their combined profit shrank by a quarter to 3.5 billion euro, wiping out three years of gains.
Smaller and bigger companies both suffered, but for the ranking leaders the hit was especially hard. The top three alone reported a fall of 3.3 billion euro in their combined revenue and a drop of 565 million euro in total profit in a single year.
Governments tried to mitigate the blow on the business, pouring out millions of euro in relief packages, but their support was mostly directed to small and medium-sized companies rather than this ranking’s heavyweights. Despite the support measures, the economies in the region shrank by around 6%. In countries in which tourism generates a large share of the gross domestic product the economic contraction was most severe, exceeding 15% in Montenegro. Foreign direct investment, a major growth driver for the region, went sharply down too. Disrupted supplies and low demand affected the local companies and their main trading partners abroad alike.
Dacia retains lead despite strong pressure on bottom line
Automobile Dacia, a unit of France’s Renault, leads the ranking for a seventh year running even though its revenue declined by an annual 26% to 3.8 billion euro. On the profit side things look even grimmer, as earnings more than halved to 61 million euro. Due to the Covid crisis, the company had to stop production for more than a month. Furthermore, like other car makers, Dacia faced serious shortages of semiconductors that forced it to even suspend production on several occasions. However, despite the challenges, the company stuck to its plan and rolled out its new Logan models. Investments made by Renault Group in Romania since 2000 amount to some 3.5 billion euro.
Problems with component supplies and depressed demand affected the automotive sector both regionally and globally. New passenger car registrations across the region dropped in the double digits – from 22% in Romania to as much as 43% in Croatia in 2020. Unsurprisingly, the combined revenue of the automotive manufacturers in SEE TOP 100 plunged by 13%.
Economic slump, travel bans, low prices dent oil companies’ revenues
The situation in the oil and gas sector is in no way brighter. The oil and gas companies in SEE TOP 100 saw their combined revenue slump by a quarter, making the sector the biggest loser in the ranking. The number of representatives of the sector in SEE TOP 100 also fell – to 20 from 25 a year earlier.
Notably, four of the top five money losers among the SEE TOP 100 entrants are oil and gas companies, with Bulgaria’s Lukoil Neftochim leading the pack. The Burgas-based refinery’s revenues more than halved and its loss increased more than fivefold compared to 2019.
At no. 2 in the ranking, OMV Petrom’s turnover fell by 17% to 3.8 billion euro while its profit collapsed 62%. The Romanian company’s weak performance was mainly due to the economic decline caused by the COVID-19 crisis and low prices on global markets. OMV Petrom’s total hydrocarbon production fell by an annual 4% to 52.98 million barrels of oil equivalent (boe) in 2020 due to lower output in Romania.
The global shift to green energy is impacting strongly the oil and gas companies’ development strategies too, forcing them to diversify their activities. OMV Petrom entered the market of liquefied natural gas deliveries in a bid to expand its offer of low-emission transport products, while Slovenia’s Petrol is investing in wind energy and electromobility.
Retailers rake in profits as shoppers go online
For the first time since SeeNews started publishing its ranking of the biggest companies in Southeast Europe fifteen years ago, wholesalers and retailers have overtaken the oil and gas sector, emerging as leaders in terms of total revenue, profit and number of entrants in the ranking. The sector’s strong performance comes on the back of an upsurge in e-commerce as a result of pandemic-related restrictions to people’s movement and the operations of physical stores. However, the Covid pandemic only served as a catalyst for a trend that has already been underway for a few years earlier.
The rapid development of online commerce in the region in recent years follows large-scale investments made by retailers in infrastructure, easier online payment processes and the development of new financing options for shopping such as loans instantly approved online, as well as quick delivery of goods. At the same time, discount chains across the region have been expanding rapidly their physical store networks. The Romanian units of Lidl and Kaufland are the sector’s top performers in the ranking, as Kaufland Romania alone invested 300 million euro in 2020.
Healthy profits for pharma companies
The pharmaceutical companies are among the few businesses for which the health and economic crisis had a positive dimension as their production remained uninterrupted and sales volumes grew. The three drug makers in the ranking posted a 15% return on revenue combined, the highest among the sectors, during the Covid-marred year 2020. Their robust performance came on the back of heavy investment in the expansion of production, packaging and storage capacities. The sector’s leader, Slovenia’s Krka, benefited also from a vertically integrated business model reducing risks related to the supply chain.
***
SEE TOP 100 ranks the biggest companies in Southeast Europe by total revenue for the fiscal year ended December 31, 2020. Both 2020 figures and 2019 comparative counterparts are sourced from 2020 annual non-consolidated reports. Тhe SEE TOP 100 ranking covers non-financial companies registered in Albania, Bosnia and Herzegovina, Bulgaria, Croatia, North Macedonia, Moldova, Montenegro, Romania, Serbia and Slovenia. Banks, investment intermediaries, insurers and real estate investment trusts (REITs) are excluded from the ranking as total revenue is not an accurate indicator of their performance. We have compiled separate rankings of the largest 100 banks and insurers. Holding companies, on the other hand, are represented in the ranking by their subsidiaries. All data is sourced from national commercial registers, stock exchanges, government and corporate websites, industry regulators, local business information providers and companies themselves. The initial pool of companies exceeds 2,900. The ranking does not include companies that declined or failed to provide financial results by the time SEE TOP 100’s content was finalised. To allow comparison, all local currencies in the rankings have been converted into euro, using the respective central bank’s official exchange rate on the last working day of 2020 and 2019. Year-on-year changes in the companies’ financial indicators have been calculated using the figures in the original currency.
Elsewhere, local currency figures referencing past periods have been converted into euro using the respective central bank exchange rate as of the end of the relevant period while all other local currency figures have been converted using the exchange rate as of the date the relevant editorial content was finalised.