Study: Romanian companies post 0.5 % average net profit rate

In 2011, the aggregate net profit at a national level for companies active in Romania was of approximately EUR 1.1 billion, which spells out an average net profit rate of 0.52 percent, more or less the value of the minimum wages per economy, according to a study conducted by Expense Reduction Analysts Romania (ERA). “Of course, we must look at these figures carefully, as behind them there are both elite companies that are extremely competitive and losing businesses, genuine black holes that cancel the positive effects on the economy that the former have,” stated Cristian Ionescu, Country Manager with ERA Romania. “However, a 0.5 percent net profit rate at a country level and a net consolidated profit level of under EUR 1.2 billion in 2011 indicate the very weak performance and competitiveness of the local business environment. This is a starting point for the analysis of the results of 2012, which appears to be a much better year.” According to the ERA findings, the total value of the Romanian companies’ turnovers increased by 18 percent in 2011, reaching EUR 226.5 billion. The average turnover for Romanian companies stood at EUR 383,914, or 22 percent more than in 2010, when it only reached EUR 313,763. Almost half of the consolidated turnover for 2011 was due to the operations of 1,250 companies with under EUR 50 million worth of businesses, but which grabbed a EUR 118 billion share of the 2011 pie. The highest net profit rate, namely 4.5 percent, is to be found in the EUR 500 million to 1 billion segment which comprises 23 companies. There were 10 major league players on the Romanian business turf, two more than in 2010, each with turnovers exceeding EUR 1 billion and an average profit rate of 2.8 percent. ERA found an overall average net profit rate of 6 percent and a EUR 48,700 average net profit value for all companies with positive end of year balances. Average net profit rates go as high as 20 percent for some small and very small companies, with reported turnovers of up to EUR 100, 000, and as low as 3 percent for the 100 to 500 million turnover segment. The small and very small business niche also scores high on the net loss scale, with an average of 27 percent of the medium turnover for 2011, namely EUR 4,300 per company. ERA Romania, the local branch of Expense Reduction Analysts conducted an analysis of Romanian companies at a micro-economic level based on the balance sheets submitted to the Romanian Ministry of Finance and the Trade Register in 2011, while also performing a comparative assessment against the figures reported in 2010. Founded in 1992, Expense Reduction Analysts is a company specializing in cost and acquisition management focusing on improving business performance for both its private and public sector clients. Ioana Jelea, ioana.jelea@romania-insider.com