Six economic sectors in Romania shrank by over 50 pct in the last decade, while only two had a tenfold growth

An analysis by Iancu Guda, the president of the Association of Financial-Banking Analysts in Romania (AAFBR), cited by Mediafax, shows that holding activities is the economic sector in Romania that had the largest drop in revenues in the past decade, of over 70 percent, reaching just RON 149 million.

The sectors with the second largest drop in revenues are construction demolitions and the growing of fruiting shrubs, strawberries, nuts and other fruit trees, both with a 68 percent drop in revenues recorded at the end of last year compared to 2008.

The analysis evaluates the evolution of revenues obtained by companies active in Romania for 612 activity sectors. To filter representative sectors, Guda only looked at those that have at least 100 active companies and have revenues of at least RON 100 million, and eliminated those with extreme deviations caused by the exit or registration of important companies.

The fourth place in the ranking is taken by the newspaper editing sector (-66 percent). With 59 percent drops, magazine and periodicals editing and photographic activities followed in the ranking.

The next sectors with the highest drop in revenues were: concrete manufacturing (-46 percent), roads and motorways construction works (-43 percent), retail through stands, kiosks and markets (-41 percent) and architectural activities (-39 percent).

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“Although the residential buildings sector has had a significant growth over the last period, construction-related activities in general are reporting lower revenues compared to 2008, before the financial crisis,” Guda writes.

At the other end of the spectrum, two sectors recorded revenues more than 10 times higher than in 2008: communications equipment repairs (+1,197 percent), up to RON 371 million, followed by staff leasing activities (+1,001 percent), up to a total value of RON 2.73 billion.

On third place for growth are hospital assistance activities (+818 percent), retail through order houses or the internet (+721 percent) and fitness centers (+699 percent). Other high-growth sectors  include call centers (+657 percent), wholesale trade of components, electronic and telecommunications equipment (+452 percent), web portal activities (+348 percent) and dental care (+348 percent).

“On one hand, the disruption in the activity of some important companies can cause the decrease of revenues of an entire sector, although companies are reporting growing revenues (the survival effect has been eliminated). On the other hand, the registration of new large companies (multinational) which have significant revenues from their first year can lead to a growth in revenues at the sectorial level, even though the rest of active companies are reporting decreasing revenues (the regeneration effect has been eliminated),” Guda adds.

The AAFBR president also underlines the fact that many companies are only focused on increasing their revenues, even today, and the reality of the Romanian business environment shows that there are “a worrying number of managers who aim to increase their market share without taking into consideration the risks this strategy involves.”

The risks may include: the accuracy of estimations of revenue evolution (not working with stress scenarios); aggressive financing of necessary investments (by contracting short-term debt to finance long-term investment projects); the uncontrolled growth of spending; the superficial estimation of cashflow; the increase of fixed spending and, implicitly, of the company’s rigidity.

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