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At the moment the sales revenues and profitability of Ukrainian companies are most severely impacted by the crisis, according to the survey
KYIV, 4 June 2009 – The third Ernst & Young’s survey Impact of the economic crisis on Ukrainian companies shows that 73% of the polled companies reported decline in sales revenue, as the most significant change since the beginning of the economic crisis. 70% indicated deterioration of profitability and 64% of the respondents named cash position.
Overall, 117 major Ukrainian and foreign companies working in Ukraine participated in the survey run by Ernst & Young with the support of the European Business Association from 12 to 27 May 2009.
The impact of the crisis on reduction in sales was also noted as the top issue that companies are facing now by 65% of respondents. 63% of the surveyed companies named currency devaluation/inflation among top problems, and 59% of respondents – delayed payments by partners and clients. Meanwhile, during the February survey 84% of the polled named currency devaluation the top issue.
It was reported that Q1 2009 sales revenues declined in 77% of surveyed companies compared with their Q1 2008 results. Cumulatively, 61% of respondents reported more than a 10% decline in quarter on quarter sales volumes from the previous year, while only 8% managed to increase sales volumes at this level.
Alexei Kredisov, Country Managing Partner of Ernst & Young, said “As the Ukrainian economy continues to backslide in the ongoing economic downturn, most businesses are still adapting to the ups and downs. Most importantly, the third survey results indicate that the crisis has forced respondents to focus on reducing their costs, manage down their capacity, and drive greater efficiencies into their businesses.”
More than half of companies (62%) had to lower production levels in order to meet the change in demand, while only 15% increased their capacity. 23% left their production capacity at the same level.
All companies participating in the survey reported that they are considering undertaking or have already undertaken some form of cost reduction activities: 78% of the respondents reported they are reducing or have already reduced administrative expenses, 62% are reducing marketing and selling costs and more than half are now planning to improve operational efficiency (53%).
Anna Derevyanko, executive director of European Business Association, commented: “The crisis underlined structural skews in Ukraine’s economy. Yes, companies adapt to the new conditions of running business. But between adaptation and new investments, there lies a huge amount of work that should be carried out by our country in order to improve investment climate and renew trust of the world business-community.”
In the foreseeable market conditions, a cost reduction program remains of vital importance to 78% of surveyed businesses. Importantly, within the last three months, almost 20% more companies have realized the importance of customer relationships to their business (78% of the respondents in May vs. 59% in February) and have cited the importance of developing and launching new products or services (52% of the respondents in May vs. 32% in February).
Adlai Goldberg, Business Advisory Services Leader with Ernst & Young Ukraine, says, “In this survey, the significant increases in survey response to customer loyalty, new product development/launch, and client relationship management suggest that Ukraine may have turned the corner on the concept of customer care.”
Since the last survey, there has been a shift toward the hryvnia for planning and budgeting purposes: 42% of businesses reported that they plan to use the Ukrainian hryvnia as a major budgeting currency. The euro is the second most popular currency after the hryvnia, with 36% of respondents reporting they will use it (average exchange rate – UAH10.50/EUR). 18% of respondents plan to use the US dollar for budgeting purposes (average exchange rate – UAH7.65/US$).
No matter how difficult the circumstances are, survey results indicated that optimism remains: 62% of surveyed companies operating in Ukraine expect the economy to stop falling and 72% of respondents expect the economy to enter a phase of recovery in 2010.”
About the survey
The third Ernst & Young questionnaire survey of the Impact of the economic crisis on Ukrainian companies was conducted among companies working in Ukraine from 12 to 27 May 2009. Overall, 117 companies participated in the survey; 25% were domestic enterprises and the other 75% were foreign companies working in Ukraine (multinational, European and regional). 51% of participants represent small businesses (up to 200 employees); 25% – medium businesses (200-1,000 employees); and big businesses (more than 1,000 employees) accounted for 24%. Companies that took part in the survey work in the retail and consumer products sector (20%), financial services (20%), pharmaceuticals (14%), real estate and construction (13%), 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 530 professionals providing a full range of services to a number of multinational corporations and Ukrainian enterprises. For more information, please visit ey.com/ua.
