International crisis catches up with biggest local businesses

Automobile Dacia announced steps to cut production to cope with the economic crisis, while the capitalisation of Petrom, the biggest company in Romania, has dropped by more than 25% over the past week and reached almost 2.3 billion euros.

Dacia, the third largest private company in Romania will close the plant in Mioveni for four days in October and November. This is the first strong signal that the economy is experiencing adjustments caused by the international financial turmoil, which is not showing any signs of a slowdown. Car parts manufacturers, the industry that has transformed the West of the country with hundreds of millions of euros in investments over the last ten years, have been forced to cut production, too. The employees of the three factories at Takata Petri, the third leading automotive components manufacturer, will be sent home one day each, on unpaid leave. As far as the real estate sector is concerned, deals slumped in the third quarter, while at the specialised fairs, real estate developers cannot seem to get any contracts signed for sale, and the number of reservations is low. The decline in consumption appetite is also showing in the automotive industry (a Ford dealer says it is delivering four times fewer cars a day than three or four months ago), in electrical retail, where Depozitul de Calculatoare closed 12 stores less than one year after opening them and in the DIY and food retail, as well. Carrefour, the biggest operator of hypermarkets on the Romanian market, posted an organic growth (with the same number of stores) of sales by 5.6% in the third quarter compared with the same time in 2007, which is half of what it was in the second quarter. Neither Praktiker, the biggest operator of DIY stores, reports the growth it used to in the previous years, with the company seeing its sales stagnate in the first nine months of this year. Also in terms of consumption, the beer industry, one of the most dynamic in Romania, is investing much less in advertising than it used to, with its advertising budgets going down in September this year to less than one third of the value in September 2007. The investors on the Bucharest Stock Exchange just went through another week of hell, when they accumulated losses worth almost 20% of the BET index. The worst hit were the investors in SIFs (financial investment companies), who lost one third of their money over the last five trading sessions. The keyword of the entire industry is revision of budgets for 2009, while the statements of the main actors in the pharmaceutical industry, food industry, energy and constructions are increasingly pessimistic. The reduction in the fuel consumption as a result of the decline in purchasing power is but one of the effects that local petroleum companies expect if the crisis on international markets continues. Another effect will be prioritisation of investments, which will make more companies direct their funds towards organic growth, before acquisitions. Despite the price of assets having dropped sharply, financing is becoming harder and harder to get, which makes companies think twice before making an investment outside their structures.