Research, logistics, pharmaceutical production and IT services’ debt ratio on the other hand, is lower than 50%.
Average debt ratio of companies in Romania is 66%, according to Finance Ministry data. The debt ratio is calculated as a ratio of the total debts and total assets of the companies in each of 99 major industries (by NACE codes) in the local economy.
According to ZF calculations, the debts of the companies stand at almost EUR190 billion, while assets amount to EUR285 billion. There are 640,000 companies in Romania, but only 450,000 of them with more than zero revenue. The overall revenue of the companies in Romania stood at EUR250 billion in 2013. The ten most debt-laden industries posted EUR15 billion revenue in 2013.
“Debt ratio depends on the industry, but usually a debt ratio of more than 60% may become troublesome for a company,” explained Dragos Cabat, managing partner of advisory firm Financial View.
“Of course, this indicator needs to be correlated with the operating profit margin of a company because a solid result allows one to pay one’s installments on the principal and interests on time.”
Coal mining is the most debt-laden sector in Romania, with a 411% debt ratio. The inclusion of this industry, which is now employing 3,000 people compared with 21,000 in 2008, in the ranking is not surprising, considering Compania Nationala a Huilei (National Black Coal Company) has been in almost every large debtor ranking over the last few years. CNH ranked first among companies with less than one year old debts in 2013, as well, when such debt stood at almost 5 billion lei (about EUR1.1 billion), according to Trade Registry data.
Next in the ranking are restaurants and metal ore mining industries, with an over 100% debt ratio. Remin Baia Mare, one of the top ore mining companies had more than RON550 million debt, while assets stood at RON98 million and revenue at merely RON40 million in 2013, according to its financial reports.
“The higher the debt ratio, the higher its risk of default,” Cabat adds. He means the restaurants and building construction, two sectors now among the five most debt-laden, which saw one of the highest numbers of insolvencies during the crisis.
Finance Ministry data, however, show that usually the debt ratio of the major companies in each industry is 5% to 10% lower than the sector average, so leaders manage to keep debt under control. Things change outside the top 20 companies where small businesses became the victims of the arrearage that goes from suppliers to banks.
Debt ratio of companies in Romania went from 61% in 2009-2010 to over 70% in 2011-2012 only to fall to 66% in 2013, according to Finance Ministry data. The 2014 figures have not been made publicly available yet.
While the average debt ratio is 66%, there are two sectors where the ratio barely reaches 20% – research and oil drilling.
(English version by Loredana Fratila-Cristescu)