Most of the distribution companies with growing business, namely 80 percent, faced liquidity problems, according to Coface Romania.

Coface analyzed the evolution of local distributors of food, agricultural products and other goods, on a sample of over 27,000 companies active in the wholesale trade of food, beverages and tobacco, the wholesale trade of agricultural products, animals and plants, and the trade of other goods, reports local Mediafax.

The financial situations published by the Ministry of Finance show that companies within these areas generated in 2012 a total turnover of RON 100 billion (some EUR 22 billion) and over 120,000 jobs, holding a 9 percent share of the turnover and a 3 percent share in the total number of employees of companies active in the economy.

The company’s analysis shows that 8 out of 10 distribution companies that posted profit in 2012 also have a negative or insufficient cash flow, compared to the value of short-term debts, prioritizing the commercial result over the prudential one.

On the other hand, only 10 percent of the distribution companies that recorded losses showed a sufficient liquidity to cover current debts.

“Thus, it can be appreciated that for the companies in the analyzed areas, an operational loss is equivalent, in 90 percent of the cases, with the appearance of liquidity problems, while reporting profits shouldn’t be sufficient for guaranteeing commercial loans or risk exposures, because 80 percent of these profits are not monetary,” according to Coface Romania, quoted by Mediafax.

Moreover, “similar conclusions are also obtained through the correlation between the dynamics of sales volume and liquidity indicators, meaning that 80 percent of the analyzed distribution companies that reported increasing turnover, actually face liquidity problems”.

The Coface data show that over 6,100 of the 27,645 companies considered active in the three analyzed areas in 2012, or 22 percent of the total, entered different stages of insolvency or dissolution proceedings during 2013, or temporarily halted activity.

The number of companies that have ceased operations was higher than the number of newly established companies between 2011 and 2012.

Irina Popescu, irina.popescu@romania-insider.com