Automotive & equipment industry - a true model to counter the financial crisis effects

Coface Romania has conducted a study regarding the evolution of the Romanian automotive & equipment industry that is characterized by both significant impact and long-term opportunities. At the end of 2011, the active companies of this industry generated a turnover of 66 BEUR and 255,032 jobs, representing more than 6.5% of what the national economy is generating.

After 2 consecutive years with 550 MRON net losses at the end of 2009, the companies from this sector have succeeded in 2010 a true revival by obtaining a positive net profit of 881 MRON and in 2011 they marked the strengthening of this evolution through a spectacular growth in net profit (61.5%), up to 1.42 BRON.

Automotive and equipment industry - a strength of the domestic economy 

The positive situation of the sector, indicated by an increase in turnover (+20%) and number of employees (7%) in 2011, compared to the previous year, is confirmed by the evolution of the company's profitability, which is a real strength of this industry and one of the elements that have contributed to an improved financial position during the period. 

These developments are all remarkable; on the background of a detailed analysis of turnover and profit, we noticed that there were obtained outstanding results at sector level based on the contribution from all segments sized companies, operating in all 5 divisions of activity considered. 

Thus, the increase of turnover with 11.15 BRON in 2011, compared to 2010 was possible due to small and medium enterprises (cumulative growth of 1.36 BRON). We also noticed that during 2011, the activities for all five divisions of the sector were profitable, with profit shares between 6% (33 Division) and 30% (29 Division). 

Based on the debts’ evolution in turnover’s changes, 55% of the active companies from this sector show a low or medium risk of insolvency, 31% registered an increasing risk and only 14% faced a higher risk, which is a very similar scenario to the companies individually analyzed by Coface in 2012.  

The positive and constant evolution of the most important 100 companies for 2012 (cumulative increase in turnover of over 6% on 31.12.2012) creates future grounds for the development trend of the entire sector.

Payment discipline of the companies of the automotive & equipment industry could partially affect the evolutionary trends of the sector 

14% of the companies registered unpaid debts to the state budget on 31.03.2013. The average value of unpaid debts per company in the sector (963 KRON, up to 50% compared to 2012) is significantly influenced by the top 5 largest companies (top 5 debtors), which generates no less than 51% of the total debt. 

Correlating this evolution with the 35% reduction in the number of companies that have unpaid debts on 31.03.2013 compared to 31.12.2012, we can draw the main trend in the sector: while most taxpayers in the sector (86%) paid their debts on time, there are usual big debtors, who continue to accumulate debts and deteriorate the situation of the sector. 

Reducing the number of companies with payment delays due to increased average value of unpaid debts to the state budget is in line with the general trend of the market, given that Coface noticed in its 2013 studies an increase of liquidity problems among medium and large companies. 

The recent evolution (2012 and H1 2013) shows a new trend of deterioration regarding the payment behavior in the sector, the most worrying aspect being 411 payment incidents for H1 2013, and a similar trend in the second half of the year would lead to a new difficult moment overcoming the number of incidents registered in 2009 due to the financial crisis. 

In terms of insolvencies, automotive and equipment industry does not place among the first sectors 

At the end of the first half of 2013, 1,412 companies (26% of total) appeared as debtors with the following status: insolvent/ payment summons, 281 of which are registered in court in more than 5 such cases. 

In terms of insolvencies, automotive and equipment industry does not place among the first sectors, ranking 15 in the top 23 sectors with less than 1% share in the total number of insolvencies registered nationwide (in relation to the total number of active companies in Romania). 

Financial indicators of insolvent companies in the sector registered lower values than those calculated for all insolvent firms in Romania, which shows that in this field of activity the insolvency proceedings has fulfilled their role of "selection" from an economic and financial standpoint. These companies experienced serious imbalances due to their vicious financial management. The companies that showed only a high sensitivity due to internal and external shocks weren’t so affected. 

"The economic environment of the first six months of 2013 proved to be full of challenges. Despite the evolution of automotive & equipment industry, we noticed a deterioration in the payment behavior of this sector, the most worrying aspect being 411 payment incidents for H1 2013, and a similar trend in the second half of the year would lead to a new difficult moment overcoming the number of incidents registered in 2009 due to the financial crisis.
But the positive and constant evolution of the most important 100 companies for 2012 (cumulative increase in turnover of over 6% on 31.12.2012) creates future grounds for the development trend of the entire sector.", says Constantin Coman, Country Manager, Coface Romania.