TOP 101 - 2016 analytics

The Latvian TOP101 valuable companies list has been published already 11 years in a row. This year as well the annual reports of around 500 companies were analyzed, which brings the total number of reports in the history of TOP101 to 5000. Despite the stable GDP growth in 2015 which is shown in the graph in relation to 2016 TOP101, this year, compared to previous years, for the first time since 2010 there was a drop in the total value of the TOP101 companies, which is related to the decrease in the bank values and the value of other, smaller TOP101 companies. This year compared to the previous year the TOP101 entry threshold has significantly reduced from 44.1 million euros last yer to 41.7 million euros which is a 5.4% drop.

Taking into account that TOP101 represents not only the changes in the financial indicators of Latvian companies but also the mood of the European financial markets, we should hope that the future situation in Europe will not adversely affect the situation in Latvia. The historical trends show that a few years after the total TOP101 value drop back in 2007 also a decrease in the Latvia’s GDP was seen. So, we must hope that this is not a pattern and there will be no GDP drops or stagnation observed in the next few years. 

 

 

A significant drop in the total TOP101 value is related to the decrease of the value of Latvian banks represented in the TOP101. This year, compared to the previous year, the value of TOP101 banks has fallen by about 20% or more than 500 million euros. The significant fall in value is related to the drop of individual average value for each bank and the decrease of the number of banks represented in the TOP101, where the previous TOP101 included 10 banks, while only 8 remains in the top this year. It should be noted that the bank value drop is related to the situation in the European financial markets, as the equity of all 8 banks represented in the TOP101 has grown in comparison with the previous year.

As in the previous year, the proportion of TOP101 companies has remained almost unchanged, where the total value of the ten most valuable TOP101 companies has slightly fallen from 40.1% last year to 39.5% this year as compared to the value of all TOP101 companies. Similarly the proportion of the 51st - 101st place from 18.5% to 17.6%. At the same time the proportion of the 11th - 20th and 21st to 50th place.

These segmentation changes are clearly shown by the average value changes in each segment, where the value of the 11th - 20th place has grown by about 6.5 million and the average value of 21st - 50th place has grown by about 2.4 million EUR. Thus, the value of the ten most valuable companies has fallen by 16.3 million, but the average value of the 50 smallest companies represented in the TOP101 has fallen by 3.5 million euros.

Along with a significant drop of the bank values, the value of the whole financial service sector has dropped by 19% this year. As a result, despite a 13% reduction, the transport, transit and logistics industry is rapidly closing in on the financial service industry and it is only 110 million euros away. It is very likely that the first spot on the next year’s TOP101 by industry segmentation will be taken by the transport, transit and logistics industry.

Yet no hasty conclusions should be drawn regarding the next year’s potential largest industry represented by TOP101, because, for example, in 2007 the second largest sector represented in TOP101 was IT and telecommunications. Due to market changes the telecommunications company value has significantly decreased and this year it is only in 5th place. The most significant negative changes in the IT and telecommunication industry have been directly linked to telecommunication companies, where the competition has increased and the total value of the companies has dropped. Comparing telecommunication company segmentation map in 2007 and this year, it shows that the total value of all three telecommunication companies represented in the 2007 TOP101 has dropped by 46% from 1854 million euros in 2007 to about 1006 million euros in 2016. Given that new companies have entered the market, when looking at the telecommunications industry as such, it is clear that the TOP101 company value has fallen to 1185 million euros, which is a 36% drop compared to 2007. A significant value drop in the industry means that the newcomers have taken up not only a market share, but also created competition and the whole telecommunications industry has suffered as a result. For example, TELE2 has lost 64% of its value in the last decade, Latvijas Mobilais Telefons has lost 60% and only Lattelecom has managed to increase its value by 5%.

Telecommunication company value in 2007 was 1854 million EUR.

Telecommunication company value in 2016 is 1185 million EUR.

This is the third year when the TOP10 most valuable companies in the Baltic States are listed. Representatives of the Baltic TOP10 are mostly financial and energy industry companies. All three years all three Baltic energy heavyweights - Eesti Energia, Latvenergo and Lietuvos Energia have been included in the Baltic TOP10.  Despite the annual change in the value of the companies, it is clear that there is certain stability in the energy sector, where situation has remained unchanged during these three years. Accordingly, the company Eesti Energia was among the most valuable energy companies, Latvenergo was number two and Lietuvos Energia was the last one among the energy companies. 

To sum up the results of TOP101 2016, it is clear that the total value of the companies has decreased, which is mainly related to the drop in the value of the banks, the drop of value of other companies due to geopolitical situation and the mood of the European financial markets.  Overall it appears that Latvian companies have been able to adapt to the complex geopolitical situation which has significantly increased the activity of many businesses. Much like last year, it shows that the Latvian business environment is characterized by the ability to adapt, which will result in further development of the Latvian companies and the improvement of overall living standards.