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Contact person: Natalia Partach
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Unavailability of capital and devaluation of the Hryvnia are top problems for Ukrainian companies
KYIV, 24 February 2009 – The second Ernst & Young’s survey Impact of the Economic Crisis on Ukrainian Companies shows that 84% of the polled companies reported devaluation of the Hryvnia their top business issue. 66% are struggling with delayed payments by partners and clients; 54% are trying to reduce overall operating expenses while 53% are worried about the increased cost of financing.
Overall, 107 major Ukrainian and foreign companies working in Ukraine participated in the survey run by Ernst & Young jointly with the European Business Association from 30 January to 13 February 2009.
Analyzing changes that happened after September-October 2008, survey participants noted that most of all the following aspects of running business suffered: ability to access loans/capital (76% of the respondents), ability to invest in capital programs (70%), and cask position (69%). Meanwhile businesses also received new opportunities for development, though only 26% of the participants noted that.
Companies’ sales volumes continue to fall. 58% of businesses are already seeing lower quarter to quarter sales volumes in Q4 2008 than in Q4 2007.
Alexei Kredisov, Managing Partner of Ernst & Young, said "Today survey participants name decreased access to loans and capital and devaluation of the Ukrainian Hryvnia as their top problems. Here we witness Ukraine moving into the next phase of the economic crisis on the back of local finance and currency issues. Financing the business and cost reduction are at the top of the agenda."
77% of companies reported that they will treat cost reduction with much more importance given the foreseeable market conditions. Businesses opt for traditional ways of reducing their costs: 80% of respondents reported they are reducing or have already reduced administrative expenses, 57% are negotiating better terms with landlords or property owners, 51% are streamlining their operations, and 47% are going through reductions in personnel.
Two-thirds of respondents are planning their 2009 budget in a currency other than Hryvnia. The Euro is the most popular currency, with 40% of respondents reporting they are going to use it. For budgeting and planning, the range of exchange rate used was surprisingly wide - between 7.50 and 13.20, the average was 10.40. 34% of businesses use the Ukrainian Hryvnia as a major budgeting currency. Finally, 23% of respondents use the US Dollar for budgeting purposes. The exchange rates used range from 5.05 to 9.00, according to most of the respondents.
Adlai Goldberg, Business Advisory Services Leader with Ernst & Young Ukraine says, "Over the three month period since the last survey, profit outlook has sharpened, either significantly improving or worsening. Overall, the poll shows that the Ukrainian business community has become more pessimistic with regard to their business results in 2009."
Most respondents (65%) anticipate lower profits in 2009 than in 2008: 39% of respondents anticipate moderately lower profits, while 26% expect profits to fall dramatically. Meanwhile only one-third expects the same level or even higher profits in 2009 than last year.
About the survey
The second Ernst & Young questionnaire survey of the impact of the economic crisis on Ukrainian companies was conducted among companies working in Ukraine from 30 January to 13 February 2009. Overall, 107 companies participated in the survey; 18% were domestic enterprises and the other 82% were foreign companies working in Ukraine (multinational, European and regional). 50% of participants represent small businesses (up to 200 employees); 27% – medium businesses (200-1,000 employees); and big businesses (more than 1,000 employees) accounted for 23%. Companies that took part in the survey work in the retail and consumer products sector (18%), real estate and construction (13%), IT and telecommunications (13%), financial services (10%), and other areas.
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 135,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve potential.
In Ukraine Ernst & Young established its practice in 1991. Ernst & Young Ukraine now employs more than 570 professionals providing a full range of services to a number of multinational corporations and Ukrainian enterprises. For more information, please visit ey.com/ukraine.
