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PwC survey: Most Romanian units of multinationals expect up to 25% loss in revenue in 2020

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Some 75% of Romanian companies that are members of multinational groups, estimate that their revenues will fall by up to 25% this year, compared to 2019, as a result of the coronavirus crisis, PwC Romania said on Friday, citing results of a new survey.

Some 15.5% of the companies estimate the decrease in revenues between 25 and 50% this year,  according to "Pricing Challenges during and post Covid-19" survey conducted by PwC Romania during April-May 2020.

At the same time, almost half of the Romanian entities of multinational groups estimated a  decrease in profit margin from transactions with affiliated parties, and 36% of the respondents indicated that eventual expenses generated by the Covid-19 crisis won’t be reimbursed by the group.

"Transfer pricing policies were conceived and implemented by companies in a period of economic growth and therefore now are being reconsidered. The groups assess the medium and long-term impact of the pandemic, taking into account measures to streamline and reduce costs," PwC Romania country managing partner Ionut Simion said.

"Thus, the evolution of the relations with the affiliated parties has a high dose of uncertainty, not being clear to what extent the parent groups will decide to support the local entities to cover their losses suffered during the interruption of the activity."

In terms of liquidity, most respondents indicated that they had enough cash to support their business, and in the event of major problems, 60% indicated that they will seek to renegotiate payment terms, without contracting new funding. Only 20% of respondents said they would try to obtain additional funding from third parties.

According to 28% of respondents, the main extraordinary expenses generated by the Covid-19 crisis are related to the workforce, as the employer must provide a safe environment for work and buy adequate equipment and supplies.

Almost a third of respondents say they have already made these expenses, 32% say they will make them in the next 3 months, and 28% by the end of 2020.

The PwC Romania study was conducted in April - May 2020 based on information provided by over 30 companies from: retail / FMCG, IT&C and technology, services, industry, pharmaceutical and real estate. In terms of business models operated locally, 72% of respondents have a limited functional profile, where group decisions are implemented locally.

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