Step-by-step budgets for 2009

Most managers interviewed by Business Standard have considered an exchange rate of less than RON 4 for one euro, slightly above the current level. Thus, many companies are working with two scenarios, in order to consider the pessimistic alternative. For example, the Sanador medical service supplier made calculations based on an average exchange rate of RON 4.5/€1 for 2009, but in the worst case scenario, this estimate goes up to RON 5/€1.

Forecasts by most companies differ from the official estimate of the National Prognosis Commission (CNP), which speaks of a RON 3.6/€1 exchange rate in 2009. The difference is significant compared to the exchange rate taken into consideration by the authorities. Thus, according to officials of CFR Calatori passenger railway transport company, the Ministry of Economy and Finance indicated a RON 3.45/€1 exchange rate.

The evolution of the exchange rate is important especially for exporters, but also for companies who used foreign currency loans to finance their growth. Exchange rate fluctuations could make the difference between a profitable year and one in which companies register losses.

The Grupul Energetic Tender energy supplier has considered a RON 4.4/€1 exchange rate, similar to that considered by the InterAgro chemical complexes. Lenders such as Banca Comerciala Romana (BCR) and Raiffeisen are computing their 2009 budget based on an average exchange rate of RON 3.8-3.9/€1, but this quotation can be updated simultaneously with budget indicators.

“In the 2009 budget we have considered a reference exchange rate of some RON 4/€1. However, there are many other factors that must be taken into consideration, and adaptability to market conditions is necessary to overcome the period immediately ahead,” said Stefan Padure, Vice President of the Angst cold meat producer. The volatility produced by the crisis which is dominating financial markets is determining certain companies to consider updating their budgets regularly throughout the coming year.

“Unlike last year, when we drafted an annual budget, in 2009 we will try to make quarterly budgets. Nobody can know what will happen in three months. I have talked to many bankers, economists, and renowned professors from Harvard and the London School of Business, and nobody knows how long the crisis will last,” said Serban Toader, Senior Partner of KPMG Romania, a major advisory and audit company. Some managers are considering hedging strategies to limit the foreign currency risk. For example, Wael El Ghadban, General Manager of Top Brands Distribution, has opted for futures contracts. Managers expect the leu to register a slight appreciation in the second half of 2009. Company officials indicated that the election period caught them with their budgets already made, and they do not know if fiscal changes are to come.