romania business outlook survey - june 2013

A vision for growth Business outlook survey – Mid-year edition

Romania 2013

A Vision for Growth 2013

What is “A vision for growth”?

“A vision for growth” explores perceptions of top executives from major companies operating in

Romania regarding the business outlook for 2013. This is the mid-year edition.

This Ernst & Young report is based on a survey of 103 C-suite level executives from companies in various

sectors, who provided a perspective on how the domestic business environment is perceived at the middle of

2013. The questionnaire was open during the period 1-14 June 2013. This slide deck shows comparative

data between January and June 2013 findings.

5 main

findings

1

The perspective of turnover growth has declined during the last 6 months, however the numbers

stay strong, with 69% of respondents thinking that their turnover will grow during 2013. The

percentage of companies that expect a growth of 5-10% has decreased by 5 pps, while the

percentage of companies anticipating a negative growth of -5-10% has increased by 5 pps.

Companies’ expectations regarding profit growth remain largely the same in June

compared to January. If in January 68% or respondent companies were expecting an

increase in profits, in June the percentage decreased by only 2 pps.

More than half of the companies (53% in June) predict a growth in salary level of 5-

10%, while many of them continue to not anticipate any change (45% in June) in

salaries during this year.

Regarding the industry sector that respondent companies are active in, the trust in its

potential has decreased significantly between January and June, the proportion of the

companies “not at all confident” going up by 17 pps, while the percentage of somewhat

confident companies decreased by 12 pps.

In June, new products, cost reduction and talent acquisition are trending as reaction to the

business environment during the last year, while improving productivity and restructuring saw

a declining importance.

2

3

4

5


A vision for growth Business outlook survey

Romania 2013 - Mid-year edition

Although 2013 is a challenging

year in many respects, companies

keep positive on their expectations

to grow.

Bogdan Ion, Country

Managing Partner


Please indicate the main three elements that you use to define success. (multiple answers)

Question 1

The importance of the financial results has remained constant. The interest regarding market share

and brand awareness has increased by 8 pps and 12 pps, respectively, while customer satisfaction as

an indicator of success has decreased by 16 pps.

Total Respondents: 103

3%

6%

8%

50%

61%

72%

94%

38%

77%

64%

93%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Going public (IPO)

Number of employees

Number of years on the market

Brand awareness

Customer satisfaction

Market share

Financial results

January

June


How much do you expect your turnover to grow in 2013? (one answer)

Question 2

The perspective of turnover growth has slightly declined during the last 6 months. The percentage of

companies that expect a growth in turnover of 5% to 10% has decreased by 5 pps, while the

percentage of companies anticipating a negative growth of -5% to -10% has increased by 5 pps.

2%

1%

2%

9%

16%

46%

11%

9%

3%

3%

4%

17%

51%

13%

12%

0% 10% 20% 30% 40% 50% 60%

Exceeding -31%

-20 to -30%

-10 to -20%

-5 to -10%

0%

+5 to 10%

+10 to 20%

+20 to 30%

Exceeding 31%

January

June


(Skipped this question: 5)


Question 2(a) – By industry

It seems that companies in Manufacturing, Pharmaceuticals/Healthcare, and Retail are more

positive and expect their turnover to grow during 2013.




6%

4%

33%

13%

2%

9%

11%

13%

22%

18%

100%

100%

11%

19%

11%

18%

56%

33%

6%

7%

11%

6%

9%

27%

34%

50%

13%

11% 22%

6%

7%

33%

13%

9%

50%

22%

4%

11%

2%

6% 25%

4%

18%

11%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Exceeding -31%

-20% to -30%

-10% to -20%

-5% to -10%

0%

+5 to +10%

+10 to +20%

+20 to +30%

Exceeding 31% Chemicals

Construction / Real Estate

Food & Beverages / Agriculture

Industry / Manufacturing

IT

Pharmaceuticals / Healthcare

Power / Energy / Mining

Publishing & Printing

Retail and Wholesale trade

Services

Telecom / Media

Tourism

Transportation

Other


Question 2(b) – By company revenues

67% of respondents that expect to have a turnover growth of more than 31% are from

companies with revenues exceeding EUR 100M, the other 33% being from companies with

turnover of less than EUR 1M.




6%

9%

11%

33%

50%

33%

31%

20%

18%

11%

50%

100%

50%

33%

13%

31%

45%

56%

50%

6%

16%

9%

22%

33%

44%

24%

27%

67%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Exceeding -31%

-20% to -30%

-10% to -20%

-5% to -10%

0%

+5 to +10%

+10 to +20%

+20 to +30%

Exceeding 31%

Less than 1 M EUR

1-10 M EUR

10-50 M EUR

50-100 M EUR

100 M EUR +


How much do you expect your profit to grow in 2013? (one answer)

Question 3

Companies’ expectations regarding profit growth largely stayed the same in June compared to

January. If in January 68% or respondent companies were expecting an increase in profits, in June the

percentage decreased by 2 pps. However, in June 11% of respondents say expect their profit to grow

by more than 31% in 2013.



3%

1%

2%

5%

22%

34%

16%

5%

11%

3%

6%

23%

37%

22%

9%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Exceeding -31%

-20 to -30%

-10 to -20%

-5 to -10%

0%

+5 to 10%

+10 to 20%

+20 to 30%

Exceeding 31%

January

June




In terms of profit growth, a good mix of companies by industry sector appear positioned

in the 5-10%, as well as in the 10-20% range.



3%

13%

20%

9%

9%

6%

9%

18%

12%

19%

27%

33%

100%

50%

20%

27%

18%

13%

60%

27%

14%

6%

9%

9%

9%

19%

9%

33%

5%

9%

13%

20%

50%

20%

6%

6%

18%

9%

15%

33%

20%

6%

6%

20%

5% 5%

12%

20%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Exceeding -31%

-20% to -30%

-10% to -20%

-5% to -10%

0%

+5 to +10%

+10 to +20%

+20 to +30%





IT





Services

Telecom / Media

Tourism

Transportation

Other



In terms of revenue segmentation, companies with less than EUR 1M revenue do not expect a

decrease in profits during 2013. However, only companies with revenues exceeding EUR 10M

expect to register high growth profit rates, of over 31%.




14%

3%

13%

20%

33%

50%

20%

18%

30%

19%

20%

33%

100%

50%

40%

36%

27%

25%

20%

45%

33%

20%

5%

9%

6%

40%

27%

20%

27%

30%

38%

27%

0% 20% 40% 60% 80% 100%

Exceeding -31%

-20% to -30%

-10% to -20%

-5% to -10%

0%

+5 to +10%

+10 to +20%

+20 to +30%

Exceeding 31%

Less than 1 M EUR

1-10 M EUR

10-50 M EUR

50-100 M EUR

100 M EUR +


Companies’ expectations with regards to the evolution of employees number are similar in June

compared to January 2013: in both editions, 26% of respondents expect a growth in number of

employees, while 55% in June, versus 56% in January, will not hire new staff during 2013.

How much do you expect your number of employees to grow in 2013? (one answer)

Question 4



2%

3%

13%

55%

17%

5%

2%

2%

4%

14%

56%

21%

2%

3%

0% 10% 20% 30% 40% 50% 60%

Exceeding -31%

-20 to -30%

-10 to -20%

-5 to -10%

0

+5 to 10%

+10 to 20%

+20 to 30%

Exceeding 31%

January

June



Staff growth of more than 10% is envisaged to happen mostly in the manufacturing industry.




4%

6%

67%

9%

6%

50%

8%

19%

12%

23%

19%

18%

80%

100%

50%

15%

4%

6%

33%

15%

6%

18%

50%

15%

6%

6%

2%

15%

7%

50%

7%

12%

20%

9%

6%

2% 2%

8%

6%

12%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Exceeding -31%

-10% to -20%

-5% to -10%

0%

+5 to +10%

+10 to +20%

+20 to +30%





IT





Services

Telecom / Media

Tourism

Transportation

Other



Again, the higher growth rates, of more than 20% in terms of number of employees, will be seen

at large companies, with revenues exceeding EUR 10M.




8%

6%

18%

15%

24%

24%

40%

100%

67%

23%

31%

35%

50%

50%

15%

11%

12%

20%

50%

33%

38%

28%

12%

40%

50%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Exceeding -31%

-10% to -20%

-5% to -10%

0%

+5 to +10%

+10 to +20%

+20 to +30%

Exceeding 31%

Less than 1 M EUR

1-10 M EUR

10-50 M EUR

50-100 M EUR

100 M EUR +


More than half of the companies (53% in June) predict a growth in salary level of 5-10%, while

many of them continue to not anticipate any change (45% in June) in salaries during this year.

How much do you expect the salary level in your company to grow in 2013? (one answer)

Question 5



1%

45%

53%

1%

1%

42%

55%

2%

0 0.1 0.2 0.3 0.4 0.5 0.6

-10 to -20%

-5 to -10%

0%

+5 to 10%

+10 to 20%

January

June


The level of trust in the industry sector that respondent companies are active in has decreased

significantly between January and June, the proportion of the companies “not at all confident” going

up by 17 pps, while the percentage of somewhat confident companies decreased by 12 pps.

How confident do you feel regarding the growth of your industry for the next 6 months? (one answer)

Question 6



33%

40%

23%

4%

16%

45%

35%

4%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Not at all confident

Slightly confident

Somewhat confident

Very confident

January

June


If in January only 3% of respondents were not at all confident about the growth of their company, in

June this percentage has gone up to 15%, while the proportion of very confident companies has gone

down to 15%, from 25% in January.

How confident do you feel regarding the growth of your company for the next 6 months? (one answer)

Question 7



15%

31%

39%

15%

3%

32%

40%

25%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

Not at all confident

Slightly confident

Somewhat confident

Very confident

January

June


The importance of low cost as competitive advantage has increased, while the one of partnerships

has decreased by 9 pps. Strong brand awareness continues to be perceived as the main strength of

competitors.

Please describe the main strength of your competitors in the local market, Romania. (one answer)

Question 8



40% 40%

12%

5% 3%

31%

39%

14% 14%

2%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Low cost Strong brand awareness (trust)

Distribution channels

Partnerships R&D

June

January


To what extent do you expect your customers' demands to change in the next 6 months? (one answer)

Question 10

In June, more companies compared to January do not expect any change in customer demand,

while 51% assume that it would somewhat change.



47% 51%

2%

32%

66%

2%

0%

10%

20%

30%

40%

50%

60%

70%

Stay the same Somewhat change Change dramatically

June

January


What impact will the change in customers' demand have on your company in the next 6 months? (one answer for each option)

Question 11 (a)

In June, more companies believe that the change in customers demand will have no impact on

their operations. The percentage grew by 12 pps.

Total number of responses:

30%

18%

51%

63%

19%

19%

0% 20% 40% 60% 80% 100%

June

January

Operations

No impact

Moderate impact

High impact



Question 11 (b)

In June, more companies believe that the change in customers demand will have no impact on

their marketing efforts.

Total number of responses: 576

29%

21%

57%

60%

14%

19%

0% 20% 40% 60% 80% 100%

June

January

Marketing

No impact

Moderate impact

High impact



Question 11 (c)

In June, the percentage of companies that say change in customers demand will have no

impact on their brand positioning increased by 7 pps.


40%

33%

41%

47%

19%

20%

0% 20% 40% 60% 80% 100%

June

January

Brand positioning

No impact

Moderate impact

High impact



Question 11 (e)

In June, more companies believe that the change in customers demand will have no impact on their

organizational structure, with a correspondent decrease in the respondents that believe this change

will have a moderate impact on their organizational structure.


41%

36%

49%

54%

10%

10%

0% 20% 40% 60% 80% 100%

June

January

Organizational structure

No impact

Moderate impact

High impact



Question 11 (f)

In June, same as in January, a little over 20% of the companies believe that change in

customers demand will have a high impact on their innovation strategy.


35%

23%

44%

53%

22%

24%

0% 20% 40% 60% 80% 100%

June

January

Innovation strategy

No impact

Moderate impact

High impact


Which of the following best describes the primary strategy considered by your company for financing its investments in the past year? (one answer)

Question 20

In the June edition, companies expressed an increased consideration for issuing stocks for financing

investments during the last year, but the main financing resource remains the bank loans.



3%

4%

19%

46%

28%

4%

18%

47%

31%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Our company issued stocks to finance its investment

Our company used venture capital to finance its investments

Our company attracted share capital increase to finance its investments

Our company used bank loans to finance its investments

Other (intercompany loans, own resources, reinvested profit)

January

June


Which of the following best describes your company's preferred strategy for financing its investments in the following 6 months? (one answer)

Question 21

The most preferred strategy for financing future investments is through bank loans, embraced by 45%

of companies, in both January and June. 2% of the responding companies plan to issue stocks.



45%

20%

6%

2%

27%

45%

20%

8%

27%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Bank loans Share capital increase

Venture capital Stocks Other (intercompany

loans, own resources,

reinvested profit)

June

January


Which of the following best describes the reaction of your company to the business environment in the past year? (one answer)

Question 22

In June, new products, cost reduction and talent acquisition are trending as reaction to the business

environment during the last year, while improving productivity and restructuring saw a declining

importance.



3%

1%

1%

2%

2%

5%

8%

22%

23%

33%

5%

1%

2%

4%

13%

16%

28%

30%

0% 5% 10% 15% 20% 25% 30% 35%

Other

Merger and Acquisitions

Reduce capital investment

Attraction of EU funds

Reduced market coverage

Talent acquisition

Restructure of the organization

New products

Productivity increase

Cost reduction

January

June


Which of the following actions will your company take to increase sales? (one answer)

Question 23

In order to increase sales, most companies chose, both in January and June, to introduce new products and/or services for

existing clients and new distribution channels. Also, more companies think about M&A as action to be taken in order to

increase sales. Regarding price cutting, we can see a decline of 8 pps between January and June as an action to increase

sales.



8%

9%

10%

13%

24%

28%

33%

72%

5%

8%

18%

20%

26%

33%

31%

75%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Merging with and/or acquiring competitors to increase market share

Increase prices

Cutting prices

Adapting existing product/service for new geographic markets

Increase investment in marketing and sales

Enter new geographic markets for existing products/services

Opening new distribution channels/reorganizing distribution to use multiple channels

Introducing new products and/or services for existing client and to attract new clients

January

June


In case of stagnation/decline in your current markets what will be the step/s your company will pursue in the next 6 months? (all that apply)

Question 24

In case of stagnation/decline of markets, more companies consider seeking external funding in June

compared to the January edition. All the other options are less taken into consideration in June.



67%

39%

14% 10%

2%

76%

46%

15%

7% 2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Stay on the market until it is stable

again in order to secure it and

increase the trust level

Transform the market trough

innovative approaches

Grow on the market through Mergers and Acquisitions

Seek external funding to secure our position on the

market

Leave the market and seek new ones

June

January


Demographics The results of this survey reflect the

responses received to our

questionnaire in the period between

1 Jun. and 14 Jun. 2013, from 103

top executives of major companies

operating in Romania.


Demographics

Romanian company (yes/no) Business type

69%

31%

57%

43%

0%

10%

20%

30%

40%

50%

60%

70%

80%

No Yes

June

January

4%

22%

74%

4%

29%

67%

0% 20% 40% 60% 80%

Bussiness to Government

Bussiness to Consumers

Bussiness to Bussiness

January

June


Demographics

Industry sector

Company revenue level

1%

1%

1%

4%

5%

5%

6%

7%

7%

8%

9%

10%

15%

23%

4%

2%

2%

13%

4%

8%

9%

10%

12%

7%

7%

24%

0% 10% 20% 30%

Transportation

Tourism


Chemicals

IT

Other

Telecom/Media

Retail & Wholesale …

Services

Power/Energy/Mining

Pharmaceuticals/Heal…

Construction/Real …

Food & …

Industry/Manufacturing

January

June

7%

21%

33%

12%

27%

7%

14%

38%

12%

29%

0% 10% 20% 30% 40%

Less than 1 M EUR

1-10 M EUR

10-50 M EUR

50-100 M EUR

100 M EUR +

January

June


Demographics

Entity type

Job title of respondent

8%

20%

72%

1%

10%

22%

67%

0 0.2 0.4 0.6 0.8

Government/State-owned enterprise

Private Equity Portofolio Company

Publicly listed

Privately owned

January

June

1%

1%

2%

3%

5%

5%

11%

32%

40%

3%

4%

5%

3%

7%

4%

8%

32%

34%

0% 10% 20% 30% 40% 50%

Other

Head of department

SVP/VP/Director

Other C-level executive

Board member

Head of business unit

Manager

CEO/President/Managing director

CFO/Treasurer/Controller

January

June


Next edition will be

issued in January

2014. Thank you!