Serb firms’ profits halved last year

BELGRADE (Reuters) – Serbian companies reported profit for the second consecutive year in 2007, but cumulative net profits halved on more expensive borrowing and a less stable dinar currency, the central bank said. «The financial results of Serbian companies were positive for the second year in a row, but the net financial result in 2007 was around a half what they reported for 2006,» said Ruzica Stamenkovic, the head of the central bank’s registers department. Total net profits fell by 50.5 percent to 654 million euros, Stamenkovic said. Companies based in Belgrade, Serbia’s capital, generated 54 percent of all profits. Profitability declined in 2007, with average return on capital falling to 1.6 from 3.6 percent and return on assets to 2.0 from 2.9 percent, Stamenkovic said. Operating revenues rose by 19.9 percent, but lagged behind a 21.7 percent expenditure increase, driven by negative exchange rate differentials and higher borrowing costs, she said. Serbia’s macroeconomic fundamentals weakened in 2007, inflation hit 10.1 percent and the dinar currency was volatile as market sentiment soured over growing political instability. The report covered 84,563 companies in agriculture, manufacturing industries, mining and energy, trade, transport and communications, financial mediation, public utilities, tourism, real estate, health and education. The top performers were small private sector firms, wholesale and retail trade businesses, manufacturing industries, real estate and telecommunications sectors. The main losers were in state-controlled energy sector – electricity, gas and water production – where no privatization is planned for at least next two years.