What has happened to Ukrainian companies over the last five years? How did they survive the global economic crisis? What is their place among the region’s other behemoths?
To answer these questions, the Kyiv Post decided to compare the rankings of the 500 most money-making companies in Central and Eastern Europe. One was completed in 2008 and the other in 2012, based on the previous years’ revenues.
Deloitte, one of the largest auditing companies, did the survey.
The findings show that while most Ukrainian companies were hurt more than others by the global financial crisis, some oligarch-owned businesses managed to increase their revenues greatly during this period. Other Ukrainian companies which did not make the rankings five years ago unexpectedly moved high up the recent list.
And the status of many Ukrainian companies, state-owned or private, changed considerably in the intervening years.
“When we completed this ranking for the first time in 2008 we surprised a lot our colleagues in other countries with such strong positions held by Ukrainian businesses,” said Volodymyr Vakht, managing partner of Deloitte in Ukraine.
Vakht added that 75 companies out of 500 listed in the older ranking were Ukrainian, with total share in revenues of more than 13 percent. But even though many companies dropped out by the 2012 survey – leaving 50 — those companies still accounted for nearly 12 percent of the group’s revenue.
“Ukrainian companies felt the impact of the crisis much more than European ones,” Vakht said. However, “after the crisis, the growth rate of the largest Ukrainian companies significantly exceeded the growth rate in other countries,” Vakht said.
Thus, despite multiple changes brought by the financial crisis, state-owned Naftogaz, which specializes in extraction and supply of oil and gas, managed to increase its revenues almost four times since 2007. This happened not only because oil and gas prices went up in recent years, but also because two intermediaries, RosUkrEnergo and Ukrgaz-Energo, were eliminated from the scheme of importing Russian gas to Ukrainian industrial consumers. As a result, Naftogaz became Ukraine’s second biggest company with 9.7 billion euros in revenue at the end of 2011.
Metinvest became Ukraine’s top company in the latest list. The vertically integrated steel and mining company is mostly owned by Ukraine’s richest billionaire, Rinat Akhmetov.
Metinvest, along with energy company DTEK, also owned by Akhmetov, managed to increase their revenues around three times over the five years. This happened mainly due to mergers and acquisitions of several enterprises, including those acquired from the state. Revenues of both companies amounted to more than 10 billion euros ($13 billion) and 3.6 billion euros, respectively, in 2011.
Because of privatizations, however, the number of state-owned companies mentioned in the list halved.
Apart from energy companies and heavy industry, Ukraine’s retailers, food and agribusiness companies also did well in the past five years.
The largest chain of supermarkets, ATB Market, owned by Dnipropetrovsk businessmen who reportedly had links to imprisoned ex-prime minister Yulia Tymoshenko, also grew more than three times during the period and finished 2011 with almost 1.4 billion euros in revenues from sales.
Another retailer, Epicenter, a leading chain of home improvement and construction material suppliers, is controlled by Kyiv City Council secretary Halyna Hereha. Epicenter had revenue of more than a billion euros in 2011, more than twice as much as in 2007.
Those businesses which have their representatives in the executive power or in the parliament feel more confident than those companies that donât have such direct connections. With some minor exceptions this is generally true.— Ildar Gazizullin, senior analyst at the International Center for Policy Studies think tank
During the last five years, when Ukrainian multimillionaire Petro Poroshenko was head of the National Bank and served as the nation’s foreign minister, his confectionary corporation Roshen also more than doubled its revenues to 0.9 billion euros.
Close to Roshen, in terms of revenue growth and a place in the ranking, comes Mironivsky Hliboproduct, Ukraine’s leading poultry producer, listed on the London Stock Exchange and majority-owned by local businessman Yuriy Kosiuk.
“Those businesses which have their representatives in the executive power or in the parliament feel more confident than those companies that don’t have such direct connections. With some minor exceptions this is generally true,” explained Ildar Gazizullin, senior analyst at the International Center for Policy Studies think tank.
Over the last five years, some new names popped up in the ranking in 2012.
Among them is Ostchem, a Cyprus-registered company controlled by billionaire Dmytro Firtash’s Group DF. After purchasing most of the country’s mineral fertilizer producers, including Cherkassy Azot, Horlivka Concern Stirol, Severodonetsk Azot and Rivne Azot in recent years, the company ended up in the first half of the ranking in 2011 with 1.6 billion euros in revenues. Firtash is believed to be close to President Viktor Yanukovych.
Among the newcomers is Ferrexpo Group, which controls the lucrative iron-ore business, with interests in finance, car production and pharmaceuticals. The owner, lawmaker Kostyantyn Zhevago, was known for his support of Tymoshenko. Some think that was the reason why the tycoon faced a criminal probe in 2011. Zhevago didn’t lose his business touch, however, distancing himself from the opposition as his company increased its revenue to 1.2 billion euros in the latest ranking and remained in the first half of the top companies list.
Retail chain Fozzy Group also flexed its muscles in Ukraine. Absent from the 2008 ranking, Fozzy Group jumped to 85th place in 2012 ranking with revenue of 1.6 billion euros. Controlled by Volodymyr Kostelman, Fozzy Group owns and operates one of the largest supermarket and grocery chains in Ukraine (Silpo, Fora, Bumi and Fozzy).
Ukrainian giant agribusinesses, Kernel and Nibulon, also weren’t present in the 2008 ranking. According to 2011 figures, Kernel with member of parliament Andriy Verevsky as the main beneficiary and Nibulon controlled by Oleksiy Vadatursky earned 1.4 billion euros and more than one billion euros, respectively.
This year Khlib Investbud, a controversial grain trader with an unclear ownership structure, for the first time made it into the Top 500 ranking after earning a half-billion euros in 2011.
Moreover, it is agribusiness companies that are expected to move higher in the top list next year.
The last five years were less successful for telecommunications companies such as Kyivstar GSM, MTC Ukraine and Ukrtelecom whose revenues decreased by more than 20 percent.
While an analysis of revenues does not give the whole picture of how companies performed, the data are enough to see that in general Ukrainian enterprises grew faster than businesses in other countries in the region.
Kyiv Post staff writer Oksana Faryna can be reached at [email protected] and Denis Rafalsky can be reached at [email protected].
