Negative signals in the economy have appeared since last year, with the number of large companies in financial difficulty increasing alarmingly, reaching a record number of insolvencies in the last decade, according to experts.
The number of insolvencies reached record numbers, being the highest in the last 10 years. Archive photo
The macroeconomic context of the year 2024 – characterized by high financing costs, volatile domestic demand and exports affected by the slowdown of European economies – put pressure on the margins of Romanian companies. In this climate, large companies have managed to stay afloat, but with an increasing reliance on external financing, a sign that the economy is holding on but not recovering, insolvency experts say.
According to them, impact companies (large companies, which have assets of over 1 million euros) generate 83% of the total turnover of the economy (419 billion euros) and also concentrate 85% of total debts, consolidating their role as the core of economic activity. However, the resilience of large companies is supported more by lending and deferral of investment than by real profitability.
Although the number of companies with assets over one million euros has reached a new record – 45,064 companies, double compared to 2013, their financial performance is deteriorating: the net profit has a slight decrease, by 1.6%, debts increase by 11 billion euros, and almost half of the impact companies are still in financial difficulty, shows the study of impact companies carried out by CITR.
Resilience, not recovery: debt-fueled growth
For the year 2024, the impact companies reported a 4% increase in assets and 5% in liabilities, while the net profit is relatively stagnant and evolves negatively by only 1.6%. Turnover has remained almost constant, with no clear signs of growth, and the reduction in expenses has been marginal.
For the 30,911 companies that remained in this category for two consecutive years, the performances are slightly better – net profit +5%, assets +6%, liabilities +9% – but the general trend shows an increasing dependence on external financing and supplier credit.
“The Romanian economy is at a point of fragile balance: large companies still support economic activity, but they do so with an increasingly high degree of indebtedness. In this context, profit stagnation and debt growth for impact companies threaten their long-term stability, limiting the capacity for investment and innovation”, says Paul-Dieter Cîrlănaru, CEO of CITR.
275 companies hold almost half of the total debt
The CITR analysis highlights an accelerated polarization of risk: only 275 companies out of the total of more than 45,000 impact companies accumulate 46% of the total debts at the level of the economy.
Moreover, although companies with assets over 50 million euros represent only 2% of the total impact companies in imminent insolvency, they concentrate 50% of the debts of this segment.
“This distribution shows that economic vulnerability is concentrated at the top of the pyramid – where the financial problems of a single company can generate contagion effects on the entire economic chain“, continues Paul-Dieter Cîrlănaru, CEO of CITR.
Total debts increase to 239 billion euros
At the aggregate level, in 2024 the debts of impact companies rose to 239 billion euros, 11 billion more than in 2023. Although the growth rate is more moderate than in 2023, the structure of indebtedness changes visibly: the exposure in productive industries decreases and increases in the service and investment sectors.
The biggest jumps in indebtedness were recorded in real estate transactions (+42%, +7.8 billion euros) and energy (+24%, +3.2 billion euros), followed by trade (+8%), while construction (-16%) and manufacturing (-3%) reduced their debts.
This development confirms that the economy relies more and more on external financing, without a real increase in profitability.
Impending insolvencies at decade high
The number of impact companies in imminent insolvency – that is, entities with severe imbalances but still functioning – reached 8,749, the highest level in the last ten years, up 7% from 2023.
Of the total, 5,244 were already in this situation last year and failed to recover, 872 come directly from the financeable category, 1,048 from the restructurable category, and 1,585 are newly entered companies – entities that have exceeded the threshold of 1 million euros in assets, but are already facing financial difficulties.
Most new companies entering imminent insolvency come from construction (20%), real estate transactions (17%), agriculture (14%), trade (13%) and manufacturing (12%).
Financial prevention – from reaction to strategy
The distressed area, consisting of companies that can be restructured and those in imminent insolvency, includes over 19,000 companies, i.e. 42% of all impact companies. These are entities that, in their current form, cannot be financed and need restructuring or reorganization measures.
“The numbers show an economy that is adapting, but not recovering. Restructuring and preventive concordat become strategic tools, not emergency solutions. The timing of the intervention is decisive – companies that act early can turn the difficulty into a new stage of growth”points out Paul-Dieter Cîrlănaru, CEO of CITR.
The restructuring agreement and the preventive agreement are legal prevention mechanisms, introduced by Law no. 85/2014, which allow companies in difficulty to reorganize their activity before becoming insolvent, i.e. insolvent.
The restructuring agreement is a mechanism negotiated between the company and creditors, confirmed by the court, through which concrete financial recovery measures are established, without suspending the activity.
The preventive concordat has a more formal component, involving a supervised judicial procedure, whereby the company obtains temporary protection from creditors while it implements an approved restructuring plan. Both mechanisms give companies the chance to recover under controlled conditions, while protecting jobs and essential business relationships.
