Deloitte Central Europe Top 500, 2011Compiled on the basis of their revenue |
The list of Top 500 companies from 18 Central European countries has been compiled on the basis of their revenue from sales in 2010. Besides the general Top 500 list, Deloitte has created the lists of Top 50 banks and Top 50 insurance companies in the region.
This year's CE Top 500 ranking list, published by consulting and audit firm Deloitte, includes 13 Croatian companies, as opposed to 16 in the last year's list. As in the previous year, Agrokor remains the best ranked Croatian company. The group ended up 28th on the regional list. In the banking industry, Zagrebačka banka took the 11th position among the strongest banks in CE, whereas the 16th place made Croatia osiguranje the highest ranked insurer.
CE Top 500, 2010 Ranking report
The CE Top 500 report ranks the 500 largest companies in the region and provides commentary and insights on regional trends from Deloitte's professionals and leading executives from some of the most prominent businesses across the region.
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Find out which companies were in this year's Top 10 and which companies jumped the most places up the ranking here.
Industry analysis
- Consumer Business
Slaven Ćurić, a Manager in Financial Advisory Services (FAS) - Pharmaceuticals
Janez Škrubej, Director in Financial Advisory Services (FAS) - Energy and Resources
Ivica Krešić, Director in Financial Advisory Services (FAS) - Financial Services Industry
Ivan Fabijančić, Director in Financial Advisory Services (FAS)
Consumer Business
Slaven Ćurić, Manager in Financial Advisory Services (FAS)
The Consumer Business companies occupied high positions on the Deloitte's ranking list. Top five companies by revenue in 2010 from among the Adria region's broad-line retailers were Agrokor (28th), the Mercator Group (39th), Delta holding (86th), Konzum (97th), and the Gorenje Group, which ranked 114th on the list.
A slight or no revenue decline was reported for 2010. On the other hand, the retailers' bottom-line figures revealed high fluctuations as a result of changed customer behaviour, more emphasis on price sensitivity and, at the same time, their adaptability to challenges such as growing raw material and energy prices, exchange rate fluctuations and changes in taxation systems in the context of weak economic recovery in the region.
The slow pace of the region's recovery compared to the rest of Central Europe resulted in somewhat worse rankings of the consumer retailers. Apart from Gorenje, all other companies from the region were ranked lower than in 2009.
The leading consumer retailers in Croatia mainly managed to increase their revenues, despite the decline of 1.8 percent in retail commodity turnover rate during 2010, that is, a decrease of 1.2 percent in the GDP volume.
As expected, the economic crisis resulted in a growing number of mergers and acquisitions across the Adria region. The largest transactions of the kind in the consumer business were the acquisition of Droga Kolinska by the Atlantic Group and of Delta Maxi by the Belgian Delhaize Group. In the first half of 2011 IDEA, Agrokor's subsidiary in Serbia, acquired six sales outlets of Tuš Marketi in Serbia.
In 2010, the global economic crisis, coupled with further consolidation of the Croatian retail chains, resulted in higher private brand production and consumption levels. During 2010 private brands could be found in almost all large retailer chains, with private branding at the largest ones revealing several quality and price levels.
The medium-term outlook speaks of the expectation that the Croatian consumer business will grow as a result of recovered national economy and higher levels of disposable income. However, the movements in the prices of energy and basic foods will pose the main challenge to the growth, primarily as a result of the global trends. The 2011 economic outlook is better than what we experienced last year. The future of food and beverage retailers is much brighter than of those focused on durable goods..
Pharmaceuticals
Janez Škrubej, Director in Financial Advisory Services (FAS)
As in the previous years, only three life-science companies from the Adria region were candidates for the CE Top 500 list, namely, the pharmaceutical manufacturers Krka, Lek and Pliva.
This year again none of the pharmaceutical wholesalers made it to the CE Top 500.
They remained focused on their domestic markets so we are yet to see a merger among them which would create a player large enough to make it to the CE Top 500 list.
Although Krka managed to increase its sales in 2010 in a tough business environment compared to 2009, it occupied the 164th place on the list, which was not enough to prevent it from falling by five places compared to the previous year. Lek’s sales slightly decreased compared to 2009, which put it on the 362nd place on the list, a significant drop by 124 places. Pliva did not post its consolidated 2010 results; as a result, it was not included in the ranking list for the year. Due to the size of the market, CE top four companies in the life science industry come from Poland, with Krka, as the biggest life science company in the Adria region, being Central Europe's 7th largest by size.
Krka, having preserved its independent position, posted excellent results in the beginning of 2011, mainly thanks to the good business decisions in the past and intensified marketing and sales efforts on the market. Pliva, Hemofarm and Lek continued to operate as parts of the global strategic players, Teva, Stada and Novartis respectively. Teva continued its world dominance in the generic drug industry.
As for other local, still independent producers, one cannot miss the excellent results of Jadran Galenic Laboratory from Croatia that is growing rapidly thanks to its palette of niche products. Also, Belupo from Croatia and Alkaloid from Macedonia are in discussion to further deepen their business cooperation, which might result in a merger of the two and creation of a stronger regional player.
Other larger regional producers, Bosnalijek from Bosnia and Herzegovina and Galenika from Serbia remained independent, depsite the last year's efforts to privatize them. Last year Galenika completed the construction of a new modern manufacturing facility, which will enable it to export its products to Western markets. The Serbian pharmaceutical market saw a number of changes in the past year, especially in the pharmaceutical distribution segment. It seems that the cards will be dealt again but the winner is yet to be seen. The Serbian market continues to attract because of its currently low pharmaceutical spending per capita compared to EU average and may soon appeal to large international players.
There has been some turmoil in the Slovenian pharmaceutical distribution market, as the largest pharmacy chain, Ljubljanske lekarne, a state-owned entity, works on establishing its own distribution company LL Grosist. The results of this diversification will present themselves within a year or two given that the move is going to affect the market shares of Kemofarmacija (Celesio), Salus and Farmadent.
There will be further consolidation in the global pharmaceutical sector, as companies will seek ways to gain advantage by buying the rights to promising treatments or gaining access to new markets.
The Adria region will continue to attract global strategic players as a result of the on-going convergence with Western European pharmaceutical spending levels, the still low labour costs, as well as the availability of an excellent pharmaceutical know-how base in the region.
Energy and Resources
Ivica Krešić, Director in Financial Advisory Services (FAS)
Energy and Resources represent a steady industry rather resistant to fast changes. For years, the same players, Ina, Petrol, HEP, NIS, EPS, etc., have dominated the ranking list of the top Energy and Resources companies in Croatia and the region.
Following a significant drop in oil and petroleum product prices globally during 2009, the prices picked up in 2010, which resulted in a substantial increase in the revenues of INA, Petrol and NIS for the year. On the other hand, the extensively regulated electricity prices in the region remained stable, causing revenues of the energy companies included in the list to stagnate.
Traditionally, the Polish giant PKN Orlen occupied the first place on the CE Top 500 ranking list. PKN Orlen, also ranked top on the overall ranking list, is followed by Hungarian MOL and Ukrainian Naftogas. Last year, INA was once again the largest Energy and Resources company from the Adria region, with its revenue of EUR 3.55 billion, an increase of 16.6 percent compared to 2009. Petrol, with its revenue of EUR 2.80 billion representing an increase of 20.1 percent, remains the second largest company on the list, while the third position was occupied by HEP whose revenue amounted to EUR 1.68 billion representing a rise by 3.0 percent. NIS, a company with Gazpromjeft as its majority owner, was ranked fourth, as it earned revenue of EUR 1.57 billion and thus reported a significant increase by 24.2 percent, whereas Elektroprivreda Srbije, with a revenue of EUR 1.54 billion, representing a decline by 1.0 percent, fell from the third to the fifth position.
The regional consolidation in the Oil and Gas industry continued throughout the year, with Petrol and Lukoil proceeding with their policies of minor acquisitions.
Investments in projects to generate power from alternative sources, especially wind power projects, also continued. There are plans involving several biomass energy projects. Smaller companies continue to be leaders in alternative energy generation projects, while those large ones remain focused on maintaining their existing generation portfolios, along with plans to construct new power generation blocks in the existing thermal power plants. The latter is necessary not only because of the current energy deficit in the region but also because the useful lives of the old blocks, dating back to the ex-Yugoslav period, will soon expire.
The demand for petroleum products, gas and electricity is expected to increase slowly over the next years, with gas and electricity consumption growth exceeding the petroleum product demand partly due to their substitutes and partly due to improved efficiency in the use of petroleum products (primarily in the transport industry).
As electricity prices in most of the region's countries have been kept below market rates under the regulatory and executive branch influence, a gradual convergence with the rates prevailing on the closer EU markets (e.g. Czech Republic, Germany) can be expected over the next years.
The slow economic recovery in the region during 2010 caused higher levels of past due receivables from manufacturers and citizens. In 2011 additional measures are expected to result from active government policies to reprogramme outstanding debt so as to avoid wind-ups of manufacturing companies and disconnection of citizens, particularly in the light of the pending elections in many of the region's countries. The possibility of a renewed slowdown as a result of incomplete recovery from the 2008/2009 recession would only add to the problems.
Financial Services Industry
Ivan Fabijančić, Director in Financial Advisory Services (FAS)
The previous year was marked by uncertainty accompanying the crisis, additionally reinforced by irresolute attempts to solve the challenges faced by Greece, Spain and Ireland, as well as by weak economies in the Adria region. Those trends affected the FSI industry reflecting through poorer performance. However, despite the negative economic trends, the FSI industry in the region has preserved its stability, which is a key prerequisite for recovery. The recent stress tests, performed at majority of the banks in the region, lead to the conclusion that the banks are capable of coping with the upcoming challenges.
The topmost tier of the CE Top 50 Banks remained unchanged from the previous year. As in the previous year, the Polish bank PKO BP, with its assets of EUR 43 billion in 2010, took the first place, followed by Hungarian OTP, Czech ČSOB and Česká spořitelna, and Polish Pekao.
After the drop-out of Hypo Alpe-Adria Bank Croatia of the CE Top 50, six banks from the Adria region were found on the list. NLB, ZABA, PBZ, Erste and Raiffeisenbank from Croatia and Nova Kreditna Banka Maribor Grupa (the NKBM Group) kept their positions on the list.
Ever since the transition period the Croatian banking industry has been dominated by international groups, which are also present in most parts of the regional market. Zagrebačka banka took the 11th position on the list of the leading Central European banks. The NLB Group continued to hold the 8th place in Central Europe, despite the last year's significant increase in the bad debt provisions. PBZ was 24th, while the Croatian operations of Erste Bank and Raiffeisenbank ended up 34th and 43rd, respectively.
Similar to previous years, the significant rise in provisions for bad and doubtful accounts extended through 2010, representing a logical continuation of the balance-sheet clean-up trend from the preceding year due to significantly increased levels of non-performing loans. The data provided by central banks indicate that most of the banks remained sufficiently capitalised, despite the increasing provisioning costs, with no significant changes in the levels of profit before provisions.
As in the banking industry, the top five positions among insurances remained the same, including the one occupied by Triglav from Slovenia. Polish PZU came first, with its total premium written of EUR 3,6 billion. The Czech insurers Česká Pojišťovna and Kooperativa pojišťovna occupied the second and the third position, respectively. The fourth position was occupied by another Polish insurer, Warti, followed by Triglav from Slovenia as the fifth-ranked on the CE Top 50 Insurances.
Large independent players maintained their positions in the insurance industry of the Adria region. A strategic shift of focus from market share to profitability, still a novelty, started to bring positive results at a few firms, despite the unfavourable economic climate and continuing negative trends in the life insurance segment. Eight insurers from the Adria region entered the CE Top 50 Insurances. Apart from Slovenian Triglav, Zavarovalnica Maribor, Adriatic Slovenica and Vzajemnoj, Croatian Croatia osiguranje, Euroherc, Allianz Zagreb and Serbian Dunav osiguranje were also found on the list.
Slovenia remains the region's most developed market, both by the share of gross premium in the GDP and the gross premium on a per capita basis, keeping the country far ahead of the other countries in the region. Another sign of the market being well developed is the territorial dispersion of life insurance operations, which, in addition to its insurance component, usually has a savings component. Triglav, Slovenia's largest insurer, ranked as the fifth, followed by Zavarovalnica Maribor( 29th), Adriatic Slovenica (28th) and Vzajemna, a health insurer (35th).
The Croatian insurance market is the second largest measured by size but also by maturity. In 2010 it reported a premium decline of 1.8 percent, measured in the local currency, with a somewhat more pronounced decrease in the non-life insurance business. According to the Croatian Insurers' Association, the negative trend in the non-life insurance segment continued in the first five months of 2010, with a decline of 1.6 percent. The life-insurance business also experienced a slowdown, albeit at a slightly weaker level of 1.3 percent. The Croatian market counts 26 insurances in total. The five leading insurances held around two thirds of the total market, which speaks of a highly segmented market despite the relatively large number of insurances. Such a high number of insurance companies is a result of the perception that the Croatian market offers a significant potential, both in the light of the pending EU accession and in terms of further economic growth. Premium is expected to increase further and level up with the current statistics of Slovenia. As in the previous year, Croatia osiguranje remained the highest-ranked insurer (16th), followed by Euroherc (47th), a member of the Agram Group, and Allianz (48th).
A fierce competition of as many as 22 insurers is found the Serbian insurance market, which, relative to the market premium, is much more than in Slovenia or Croatia. Such a large number of insurances is mainly due to the country's significant growth potential in terms of its economic potency, population size and low penetration level of insurance services. It is exactly the country’s relatively underdeveloped market i.e. low base that makes the life-insurance premium growth visible, which is in line with the gradual maturation of the market and the increasing awareness among the population of life insurance as an alternative to traditional savings. Serbia's largest insurer is Dunav osiguranje, ranked 49th on the CE Top 50 Insurances list.
