Best in Kyiv

Foreign companies dominate list of 'best' taxpayers
By Vitaly Sych, Kyiv Post Staff Writer

An annual ranking of Ukraine’s most successful companies reveals that the nation’s economy is still dominated by low-tech industrial giants, with little-known middlemen controlling a quarter of all financial flows in the country.

Though Ukrainian companies recorded impressive growth last year, the country’s economy saw few structural changes, according to the rankings, compiled by business weekly InvestGazeta and Andersen Consulting. The lists reveal that Ukrainian companies greatly improved their performance in 2003.

The rankings, called Top100, list the top Ukrainian companies in terms of revenue, profits, exports and other criteria.

According to the top100 charts, the combined revenue of Ukraine’s 100 largest companies increased by more that 50 percent last year, from Hr 91 billion in 2002 to Hr 146 billion in 2003. Favorable external factors rather than restructuring were the key reasons behind the increase, the report said. Analysts have pointed to Ukrainian companies’ soaring metal exports as the major force driving the growth of the nation’s gross domestic product.

At the same time, Ukraine’s economy underwent few qualitative changes last year. Steel makers, oil processors, railways and fuel traders still dominated the list of Ukraine’s best companies ranked by revenue.

With Hr 19.7 billion in earnings, the Natogaz Ukrainy oil and gas monopoly topped the list. Of the top 10 firms, the remaining nine companies included five metallurgical plants, an oil company, a telecommunications monopoly and a nuclear power generator.

Middlemen also saw their revenue increast last year, with Donetsk-based Industrialny Soyuz Donbasa ranking second behind Naftogaz.

ISD’s revenue went up Hr 6 billion in 2003, from Hr 3.8 billion in 2002.

ISD is a diversified holding company involved in coal and coke production, electricity generation and distribution, steel-making and sales. Two other companies linked to ISD, Donetsky Industrialny Soyuz and ARS, also saw their revenue sore to more than Hr 2 billion, the report said.

Another breed of middlemen – fuel traders – had an even better year in 2003.

Sentoza took in Hr 2.2 billion last year to place 15th on the revenue ranking. Not bad, considering that Sentoza wasn’t even among the top 100 companies a year ago.

Fuel importer Fianet also made a first-time appearance on the list. Three of Fianit’s subsidiaries appeared on the revenue list in 2003, each posting earnings of more than half a billion hryvna last year.

InvestGazeta said Fianit enjoyed a duty-free regime for several years while importing fuel into Ukraine. Surprisingly, all three of Fianit’s subsidiaries reported losses last year. The report didn’t have comparative data for the company in 2002.

In all, the report said, intermediaries accounted for a quarter of the combined revenues of Ukraine’s 100 largest companies.

In the profit ranking, the Kryvorizhstal metallurgical works made a giant leap to the top of the list. Kryvorizhstal posted a profit of Hr 1 billion last year, turning around a Hr 216 million loss in 2002. In a recent interview, President Leonid Kuchma said the factory’s reversal was due to a halt of massive thefts from the plant in previous years. Kuchma said Kryvorizhstal’s new management headed by Oleh Dubyna, currently Ukraine’s first deputy prime minister, cleaned up the plant.

Though Ukraine’s industrial giants still dominate the profit ranking, consumer-oriented firms are crawling up the list. UMC and DCC mobile phone operators, Stirol fertilizer and pharmaceuticals maker and Obolon brewery have all moved up considerably, as did tobacco producers. Philip Morris finished last year as Ukraine’s 25th most-profitable company, while Reemtsma’s tobacco factory in Kyiv landed in 48th place.

The Yuzhnoye aerospace design bureau had the higest rate of profit growth last year. Participation in the Sea Launch joint venture has allowed Yuzhnoye to boost its profits from just Hr 1 million in 2002 to Hr 31.6 million last year.

Surprisingly, Ukraine’s industrial giants – firms with hefty revenues – were nearly absent from the list of the country’s biggest taxpayers. Some of Ukraine’s largest revenue makers – Naftogaz, Industrialny Soyuz Donbasa and Interpipe – were nowhere to be found even among the country’s 50 largest taxpayers.

Instead, it was foreign firms that turned out to be the largest contributors to the public’s coffers. Yelena Romanchak, an analyst with InvestGazeta, said the ranking was compiled by the State Tax Administration and didn’t include companies that had tax arrears from previous years.

Five fully of partially owned foreign companies appeared among Ukraine’s 10 largest taxpayers. Philip Morris topped the list, channeling Hr 302 million to the state.