ey - a vision for growth - september 2014

A vision for growth

Business outlook survey – Mid-year edition

Romania 2014

What is “A vision for growth”?

“A vision for growth” is a survey that explores the perceptions of top executives from major companies

operating in Romania regarding the business outlook for 2014. This is the mid-year edition.

This EY report is based on a survey of 305 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 2014. The

questionnaire was open during the period 28 July – 8 August 2014. This slide deck shows comparative data

between February and August 2014 findings.

5 main

findings

1

In general terms, the perspective of turnover growth has declined during the last 6-7 months, with a larger

number of companies envisaging negative growth values (12% in Aug vs 2% in Feb). However, the percentage

of companies anticipating a turnover growth rate of 10-31% has increased from 28% in Feb to 37% in Aug

2014. Companies’ expectations regarding profit growth largely stayed the same in August compared to

February 2014. If at the beginning of the year 84% of respondent companies were expecting an

increase in profits, in August the percentage reached only 81%. However, 8% of respondents still say

that they expect their profit to grow by more than 31% in 2014.

Companies’ expectations with regards to the evolution of their employees number are quite different

in August compared to February 2014. While in Aug 2014, 18% of companies expect a 5-10%

increase in personnel numbers, only 5% said so at the beginning of the year. Also, 22% say now that

they will have no new staff this year compared to 37% in Feb 2014.

When it comes to financing investments, companies continue to use mostly bank loans (54% in February vs.

49% in August), followed by share capital increase (10% in February vs. 22% in August). There was a steep

reduction in the “own resources, intercompany loans and reinvested profit” segment, down to 16% in August

from 34% in February 2014.

More than half of the respondent companies (51% in August) predict a growth in salary level of 5-10%,

while 30% of them (a 9% increase) continue to anticipate higher growth rates of 10-21% in salaries

during this year.

2

3

4

5

Business outlook survey – 2014 Mid-year edition

A vision for growth Business outlook survey

Mid-year edition – Romania 2014

Our survey findings show the increased

focus companies have on coping with the

challenging business environment in a way

that secures their potential for growth.

Bogdan Ion, Managing Partner, EY Romania

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

Question 1

Usually, companies measure their success by a combination of financial results, market share, and brand awareness. In

the second half of 2014, the financial results and market share elements a mild decrease while, criteria such as number of

years in the market, customer satisfaction, and brand awareness go up significantly.

Total Respondents: 305

(Skipped this question: 0)


9%

7%

7%

39%

63%

78%

96%

2%

3%

5%

18%

42%

50%

82%

88%

0% 20% 40% 60% 80% 100% 120%

Other

Going public (IPO)

Number of employees

Number of years on the market

Brand awareness

Market share

Customer satisfaction

Financial results

Aug-14

Feb-14

How much do you expect your turnover to grow in 2014? (one answer)

Question 2(a) – All answers

In general terms, the perspective of turnover growth has declined during the last 6-7 months, with a larger number of

companies envisaging negative growth values (12% in Aug vs 2% in Feb). The percentage of companies that expect

a 1-5% turnover growth decreased also by 19%. However, the percentage of companies anticipating a turnover growth

rate of 10-31% has increased from 28% in Feb to 37% in Aug 2014.




2%

3%

37%

30%

19%

7%

2%

1%

1%

2%

5%

3%

5%

18%

27%

22%

10%

6%

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

Exceeding -31%

-20% to -30%

-10% to -20%

-5% to -10%

-1% to -5%

0%

1% to 5%

5% to 10%

10% to 20%

20% to 30%

Exceeding 31%

Aug-14

Feb-14

How much do you expect your turnover to grow in 2014? (one answer)

Question 2(b) – Split by industry sectors

14% of responding companies in Food & Beverages / Agriculture industry sector, 9% in Services, and 8% in Retail &

Wholesale, Pharmaceuticals, and Transportation sectors expect a turnover growth rate of more than 31%.




14%

6%

8%

6%

8%

9%

8%

6%

14%

13%

21%

25%

4%

5%

14%

8%

15%

12%

23%

30%

21%

47%

28%

50%

33%

15%

14%

8%

22%

29%

19%

16%

37%

15%

10%

67%

50%

31%

14%

46%

35%

26%

5%

22%

14%

15%

17%

12%

14%

58%

38%

12%

6%

5%

6%

10%

7%

9%

4%

9%

10%

3%

7%

4%

6%

5%

4%

15%

6%

25%

9%

4%

3%

17%

2%

5%

6%

7%

14%

3%

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

Construction / Real Estate

Food & Beverages / Agriculture

Industry / Manufacturing

Information Technology (IT)

Pharmaceuticals / Healthcare

Power / Energy / Mining

Publishing & Printing

R&D / New technology

Retail & Wholesale trade

Services

Telecommunication / Media

Tourism

Transportation

Exceeding 31%

+20 to +30%

+10 to +20%

+5 to +10%

1% to +5%

0%

-1% to -5%

-5% to -10%

-10% to -20%

-20% to -30%

Exceeding -31%

How much do you expect your profit to grow in 2014? (one answer)


Companies’ expectations regarding profit growth largely stayed the same in August compared to February 2014. If at the

beginning of the year 84% of respondent companies were expecting an increase in profits, in August the percentage

reached only 81%. However, 8% of respondents still say that they expect their profit to grow by more than 31% in 2014.




6%

10%

30%

21%

19%

7%

7%

1%

1%

2%

4%

2%

9%

28%

22%

17%

6%

8%

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

Exceeding -31%

-20% to -30%

-10% to -20%

-5% to -10%

-1% to -5%

0%

1% to 5%

5% to 10%

10% to 20%

20% to 30%

Exceeding 31%

Aug-14

Feb-14

How much do you expect your profit to grow in 2014? (one answer)


It is noteworthy that 25% of respondent companies in Tourism sector see a potential profit growth of +31%, followed by

companies in Food & Beverages / Agriculture (14%), and companies in Industry / Manufacturing (10%).




6%

14%

10%

6%

6%

4%

8%

9%

25%

6%

9%

5%

5%

13%

8%

4%

5%

9%

18%

6%

18%

16%

13%

38%

35%

25%

34%

20%

13%

6%

18%

24%

24%

23%

30%

31%

18%

25%

33%

28%

8%

27%

25%

23%

31%

19%

33%

19%

23%

18%

25%

28%

42%

26%

35%

9%

10%

2%

19%

25%

33%

8%

5%

46%

6%

6%

2%

8%

3%

6%

5%

7%

11%

8%

9%

6%

6%

2%

6%

5%

3%

6%

3%

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










Services


Tourism

Transportation

Exceeding 31%

+20 to +30%

+10 to +20%

+5 to +10%

1% to +5%

0%

-1% to -5%

-5% to -10%

-10% to -20%

-20% to -30%

Exceeding -31%5%

Companies’ expectations with regards to the evolution of their employees number are quite different in August compared

to February 2014. While in Aug 2014, 18% of companies expect a 5-10% increase in personnel numbers, only 5% said so

at the beginning of the year. Also, 22% say now that they will have no new staff this year compared to 37% in Feb 2014.

How much do you expect your number of employees to grow in 2014? (one answer)





5%

9%

37%

30%

5%

9%

5%

1%

1%

4%

6%

22%

35%

18%

9%

2%

2%

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

-20% to -30%

-10% to -20%

-5% to -10%

-1% to -5%

0%

1% to 5%

5% to 10%

10% to 20%

20% to 30%

Exceeding 31%

Aug-14

Feb-14

The industry sectors that expect the highest growth in personnel numbers (exceeding 31%) are the following:

Retail & Wholesale trade (8%), Services (5%), and Transportation (4%).

How much do you expect your number of employees to grow in 2014? (one answer)





2%

8%

5%

4%

5%

3%

8%

4%

5%

14%

15%

15%

17%

34%

4%

10%

8%

18%

5%

19%

15%

24%

38%

67%

33%

27%

7%

14%

17%

24%

14%

30%

15%

38%

28%

33%

38%

42%

43%

60%

33%

37%

14%

19%

39%

15%

11%

33%

19%

17%

29%

40%

22%

6%

47%

8%

8%

12%

4%

12%

3%

8%

4%

5%

8%

10%

6%

14%

3%

2%

2%

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










Services


Tourism

Transportation

Exceeding 31%

+20 to +30%

+10 to +20%

+5 to +10%

+1% to +5%

0%

-1% to -5%

-5% to -10%

-10% to -20%

-20% to -30%

More than half of the respondent companies (51% in August) predict a growth in salary level of 5-10%, while

30% of them (a 9% increase) continue to anticipate higher growth rates of 10-21% in salaries during this year.

How much do you expect the salary level in your company to grow in 2014? (one answer)





19%

60%

19%

2%

1%

1%

17%

51%

23%

6%

1%

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

-5% to -10%

-1% to -5%

0%

1% to 5%

5% to 10%

10% to 20%

Exceeding 21%

Aug-14

Feb-14

The industry sectors in which companies expect a salary increase exceeding 20% are: Power / Energy / Mining (28%),

followed at a great distance by Services (9%), and by Retail & Wholesale trade, Pharmaceuticals / Healthcare, and

Information Technology with 8% each.

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





4%

2%

3%

5%

3%

8%

8%

28%

4%

7%

4%

12%

29%

38%

15%

31%

6%

33%

34%

27%

14%

30%

17%

61%

47%

51%

77%

62%

32%

67%

33%

46%

39%

57%

60%

66%

24%

19%

8%

28%

33%

15%

32%

29%

10%

13%

6%

4%

2% 4%

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










Services


Tourism

Transportation

Exceeding 21%

+10 to +20%

+5 to +10%

1% to +5%

0%

-1% to -5%

-5% to -10%

-10% to -20%

Exceeding -21%

14%

The level of trust in the industry sector in which the respondent companies operate has improved between February and

August 2014. The proportion of the companies “slightly confident” has gone down by 15%, while the percentage of

“somewhat confident” and “very confident” companies increased by 9% and 5% respectively.

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

Question 6




14%

49%

30%

7%

15%

34%

39%

12%

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

Not at all confident

Slightly confident

Somewhat confident

Very confident

Aug-14

Feb-14

If in February 2014 zero percent of respondents were not at all confident about the growth of their company, in August

2014 this percentage has gone up to 8%, while the proportion of very confident companies has gone down to 32% in

August from 40% in February 2014.

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

Question 7




23%

37%

40%

8%

20%

40%

32%

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

Not at all confident

Slightly confident

Somewhat confident

Very confident

Aug-14

Feb-14

Low cost as the main strength of the respondents’ competition in the local market increased from 26% in February to 38%

in August 2014. Competitors’ brand is not anymore the most important one (27% in Aug vs. 37% in Feb). A notable

increase is seen in the “Partnerships” segment, up to 14% in August from 9% at the beginning of 2014.

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

Question 8




38%

27%

14% 14%

6%

1%

26%

37%

14%

9% 7% 7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

Low cost Strong brandawareness (trust)

Distribution channels Partnerships R&D Other

Aug-14

Feb-14

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

Question 9

In August 2014, 53% of companies expect the demand from their customers to “somewhat increase” and 36% believe

that it will “stay the same”. However, overall there are no major variations in trends in August compared to February 2014.




August 2014

3%

37%

60%

2%

36%

62%

0% 20% 40% 60% 80%

Change dramatically

Stay the same

Somewhat change

Aug-14

Feb-14

February vs. August 2014

1%

8%

36%

53%

2%

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

Decrease dramatically

Somewhat decrease

Stay the same

Somewhat increase

Increase dramatically

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

Question 10(a) – Operations, Marketing, and Brand Positioning

Although in decrease, a potential change in customers’ demand seems to impact the most on operations of the

respondent companies (13% in August, in decrease from 21% in February) and not so much marketing and brand

positioning.

Total number of responses: 587


10%

12%

20%

7%

34%

33%

23%

27%

13%

21%

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

Aug-14

Feb-14

Lowest impact (1) (2) (3) (4) Highest impact (5)

14%

19%

20%

14%

32%

26%

28%

36%

6%

5%

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

Aug-14

Feb-14


17%

16%

21%

19%

27%

33%

27%

25%

8%

7%

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

Aug-14

Feb-14


Brand Positioning

Operations Marketing

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

Question 10(b) – CSR, Organizational Structure, and Innovation

Also in decrease, innovation comes second in the ranking of the areas perceived as having the highest impact as a result

of a change in customers’ demand (14% in August vs 21% in February 2014).



Innovation

CSR (Corporate Social Responsibility) Organizational Structure

31%

40%

31%

28%

27%

23%

9%

7%

2%

2%

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

Aug-14

Feb-14


17%

21%

20%

28%

38%

28%

20%

21%

5%

2%

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

Aug-14

Feb-14


12%

5%

16%

16%

25%

23%

33%

35%

14%

21%

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

Aug-14

Feb-14


The impact of the legal environment on the growth of the company is perceived as relatively stable at the high-end ratings

(21% in February vs 22% in August 2014).

To what extent does the legal, tax and regulatory environment play a role in the growth of your company? (one answer for each option)

Question 11(a)


8% 15%

18%

28%

35%

27%

26%

22%

21%

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

Aug-14

Feb-14

Least important role (1) (2) (3) (4) Highest important role (5)

Legal environment


In August 62% of respondents consider that tax environment plays a high and very high role in the growth of their

company, on increase from 56% in February.


Question 11(b)


Tax environment

7%

2%

8%

14%

23%

28%

31%

19%

31%

37%

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

Aug-14

Feb-14

Least important role (1) (2) (3) (4) Highest important role (5)Total number of responses: 585

The regulatory framework seems to be perceived as of a highest impact in August 27% compared to 23% in February.

Both in August and February, 33% of the respondents agreed that regulatory environment plays a high role in their

company’s growth in 2014.


Question 11(c)


Regulatory environment

7%

2%

11%

9%

22%

33%

33%

33%

27%

23%

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

Aug-14

Feb-14

Least important role (1) (2) (3) (4) Highest important role (5)Total number of responses: 585

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

Question 12

When it comes to financing investments, companies continue to use mostly bank loans (54% in February vs. 49% in

August), followed by share capital increase (10% in February vs. 23% in August). There was a steep reduction in the “own

resources, intercompany loans and reinvested profit” segment, down to 16% in August from 34% in February 2014.




August 2014

34%

2%

10%

54%

16%

12%

23%

49%

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

Own resources, intercompanyloans, reinvested profit

Our company used venturecapital to finance its investments

Our company used share capitalincrease to finance its

investments

Our company used bank loans tofinance its investments

Aug-14

Feb-14

60% 27%

13% Own resources

Intercompanyloans

Reinvested profit

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

Question 13

In August as well, companies’ main strategy for financing future investments appears to be through bank loans 48% vs.

49% in February 2014. The “share capital increase” segment is expected to be up to 26% compared to 12% in February.




August 2014

62%

35%

3% Own resources

Intercompanyloans

Reinvested profit

7%

12%

11%

21%

49%

2%

12%

12%

26%

48%

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

Other

Own resources, intercompanyloans, reinvested profit

Venture capital

Share capital increase

Bank loans

Aug-14

Feb-14

Which of the following best describe the reaction of your company to the business environment in the past 6 months? (one answer)

Question 14

In the past 6 months, businesses reacted to the pressures coming from the business environment by increasing

productivity (34% in August vs. 32% in February), by reducing costs (23% in August vs. 22% in February), or by new

products launching (16% in August vs. 17% in February).




5%

2%

5%

2%

15%

17%

22%

32%

2%

1%

3%

4%

6%

11%

16%

23%

34%

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

Other, please specify

Reduced capital investment

Reduced market coverage

Mergers & Acquisition

Attraction of EU funds

Talent acquisition

Restructure of the organization

New products

Cost reduction

Produtivity increase

Aug-14

Feb-14

Which of the following actions will your company take to increase sales? (multiple answers)

Question 15

In August, 60% of respondents say their company’s strategy to increase sales will consist in introducing new

products/services for existing clients (compared to 80% in February), 33% say they will be increasing investment in

marketing and sales (compared with 24% in February), while 18% will be adapting existing products/service for new

geographic markets (compared to 22% in February).


7%

5%

10%

22%

29%

32%

24%

80%

3%

5%

14%

18%

31%

32%

33%

60%

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

Merging with and/or acquring competitors to increase marketshare

Increasing prices

Cutting prices

Adapting existing product/ service for new geographic markets

Opening new distribution channels/ reorganizing distribution touse multiple channels

Entering new geographic markets for existing products/services

Increasing investment in marketing and sales

Introducing new products and/or services for existing clients andto attract new clients

Aug-14

Feb-14



In case of stagnation/decline in the market what will be the steps your company will pursue in the next 12 months? (all that apply)

Question 16

Unlike in February, when only 56% of companies said that they would continue to stay on the market if it declined, in

August the percentage increased up to 61%. However, a lower percentage of companies (42% in August vs. 56% in

February) seem to be willing to transform the market through innovative approaches in case such a decline occurs.




5%

10%

10%

56%

56%

4%

5%

13%

42%

61%

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

Leave the market and seek new ones

Seek external funding to secure our position on the market

Grow on the market through M&A (Mergers & Acquisition)

Transform the market through innovative approaches

Stay on the market until is stable again in order to secure it andincrease the trust level

Aug-14

Feb-14

Demographics The results of this survey reflect the

responses received to our

questionnaire in the period between

28 Jul. and 8 Aug. 2014, from 305

top executives of major companies

operating in Romania.

Romanian company (Yes/No)

Demographics


Industry sector

8%

2%

2%

4%

4%

12%

17%

4%

2%

10%

9%

26%

1%

1%

1%

2%

4%

4%

5%

4%

6%

7%

9%

9%

11%

14%

22%

0% 10% 20% 30%

Other




Tourism

Chemicals





Transportation



Services


Aug-14

Feb-14

57%

43%

54%

46%

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

Yes

No

Aug-14

Feb-14

Demographics

Company revenue level Business type

65%

29%

6%

73%

22%

5%

0% 20% 40% 60% 80%

Business to Business

Business to Consumers

Business to Government

Aug-14

Feb-14


4%

15%

29%

15%

37%

5%

21%

33%

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 +

Aug-14

Feb-14

Entity type Job title of respondent

Demographics


3%

5%

36%

56%

2%

7%

14%

77%

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

Government/State-ownedenterprise

Public Equity / Portfoliocompany

Pubicly listed

Privately owned

Aug-14

Feb-14

3%

3%

13%

8%

7%

28%

38%

1%

2%

3%

4%

5%

6%

8%

17%

54%

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

CIO/Technology director

Other C-level executive

Head of business unit

Head of department

SVP/VP/Director

Board member

Manager

CFO/Treasurer/Controller

CEO/President/Managingdirector

Aug-14

Feb-14

Project team members

Elena Badea Associate Director

Branding, Marketing and Communication

EY Romania

[email protected]

Constantin Măgdălina Senior Associate, Knowledge Management

Branding, Marketing and Communication

EY Romania

[email protected]

We would like to thank all the respondents for their contribution

to this survey. A special tank you goes to Diana Dumitrașcu

from doingbusiness.ro for her significant support.


EY | Assurance | Tax | Transactions | Advisory

About EY

EY is a global leader in assurance, tax, transaction and

advisory services. The insights and quality services we

deliver help build trust and confidence in the capital

markets and in economies the world over. We develop

outstanding leaders who team to deliver on our promises

to all of our stakeholders. In so doing, we play a critical

role in building a better working world for our people, for

our clients and for our communities.

© 2014 EYGM Limited.

All Rights Reserved.

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