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Best CEE companies poll 2010: Results index Methodology |
A TELLING FACT from this year’s Euromoney best-managed central and eastern European companies poll is that virtue does seem to bring its own reward in financial terms for many of the winners. Right from overall winner Garanti Bankasi down to the country categories, the winners are generally conspicuous for having already enjoyed, or being poised to enjoy, success in the international capital markets as a result of their management prowess.
Pick of the bunch Garanti, for example, is sounding out the main players in the syndicated loan market in search of a new facility to replace an $815 million loan that came due in March, as a result of its successful weathering of the global credit crunch and the subsequent economic slowdown. Garanti is the doyen of the top-four Turkish banks and is likely to see the pricing on its latest loan pushed down to 150 basis points all-in, from 250bp or more a year earlier. Should it return later in the year Garanti would be a prime candidate to push down benchmark pricing for Turkish risk to a new post-crisis low of 125bp all-in or even less.
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“We have completed this tough year successfully with a liquid, timely positioned and well-structured balance sheet” Ergun Özen, Garanti Bank |
Separately, Garanti continues to attract a high-class group of suitors seeking to buy a 20.85% stake in the bank being sold off by General Electric. Would-be buyers include Spain’s Banco Bilbao Vizcaya Argentaria, Italy’s Intesa Sanpaolo, Russia’s Sberbank and National Bank of Kuwait. Namik Aksel, chief executive of HSBC Global Asset Management in Istanbul, says that investor confidence in Garanti’s strategy and long-term financial performance means that the bank has sparked a rally in banking stocks on the Istanbul Stock Exchange, which has helped the Turkish bourse to test record highs in recent weeks. The bank boasted record earnings in 2009, with net income rising 64% to TL3.1 billion ($2.1 billion) and return on average equity hitting 27%. Thanks to relatively limited and selective growth in lending, non-performing loans were just 4.1% of total lending compared with a sector average of 5.2%. “We have completed this tough year successfully with a liquid, timely positioned and well-structured balance sheet,” says Garanti’s chief executive, Ergun Özen. “Our advanced risk management tools and operational efficiency are the main assurance of our performance on lending as well as our readiness against all contingencies.”
Czech power play
In the international bond markets Czech power company Cez, which placed second overall in the poll, made an ambitious move when it launched a €750 million 2025 Eurobond – the first 15-year euro-denominated corporate Eurobond in six months and the longest-dated bond the company has ever printed. Furthermore, given its reputation as a savvy operator, Cez was able to price the issue, which was more than three times oversubscribed, on the back of a €2.3 billion order book, inside its own secondary yield curve.
Lead managed by BayernLB, Erste Bank, HSBC and Société Générale, the issue shrugged off renewed worries about the state of Greece’s finances to trade tighter in the aftermarket thanks to strong demand from a solidly investment-grade investor, which illustrates the extent to which well-regarded central and eastern European corporates rated A2/A–, such as Cez, have largely shed their emerging market risk profile and are now able to aggressively pursue tightly priced, long-dated funding. According to Cez’s executive financial director, Jan Brozik, with swap yields at or near five-year lows it made sense for the company to leverage its reputation to print an aggressively pitched duration trade that matched its average duration profile as a business that operates power stations and distribution grids with lifetimes of between five and 40 years. Brozik says it makes sense for Cez to space out its refinancing needs, especially as the company intends to return to the Eurobond markets later this year in an attempt to raise further financing to cover its capital expenditure needs related to the building of a new nuclear power plant. Given its no-nonsense approach to business the company has been able to switch between the international loan and bond markets to maximize its pricing power and ability to source vital long-term funds for capital-investment purposes.
Turkcell woos customers
Leading Turkish mobile phone operator Turkcell makes it into third position in the poll, thanks to initiatives such as its customer relationship management (CRM) programme ‘Journey with the customer’, which won it first prize in a competition organized by research and consultancy firm Gartner. Meltem Sahin, who is responsible for the CRM programme, says: “Mobile communications is an intensely customer-driven business and creating consistently positive experiences for our customers is important to our success. Our CRM programme… has helped us better understand our customers and develop appropriate solutions to meet their needs, which has resulted in improved operational results.” As at end-2009 Turkcell boasted 35.4 million customers, giving it a 56% share of the mobile communications market in Turkey.
The company has also won plaudits for its investor relations efforts, ranking alongside such companies as Deutsche Telekom, Credit Suisse, Bayer and BP in the 2010 Investor Relations Global Rankings. “As you would expect from Turkey’s only NYSE listed company and a major international player, Turkcell strives to meet and ideally exceed best practice investor relations standards in Europe and in the US,” says Nihat Narin, head of investor relations at Turkcell. He adds: “We will continue to work hard to set even higher standards for financial disclosure practices in the future.” The combination of customer-centred services and high financial disclosure standards has translated into a consistent share performance in recent years, with Turkcell stock up 56% over the past five years compared with just 10.2% for the Dow Jones Industrial Average.
Russians show their mettle
The efficiency of Russian steelmaker NLMK has helped to propel majority owner Vladimir Lisin to the top of the Russian pile in Forbes magazine’s latest rankings of the world’s super-rich. Clay-pigeon shooting enthusiast Lisin more than tripled his fortune to $15.8 billion in the past year after the benchmark RTS stock index doubled in value in the previous 12 months. According to Alfa Bank research, NLMK is set to record ebitda margin growth of 23.5% in 2009 and 30.4% in 2010, well above the emerging market steel sector averages of 17.6% and 23.2% over the same period. Steelmakers such as NLMK are benefiting from their position as leading low-cost producers after suffering through a difficult 2009 as global steel demand declined. However, NLMK, which plans to increase capacity by 40% to more than 17 million tonnes in 2012, is one of the lowest-cost producers of steel slabs in the world and has been producing at full capacity since May even as demand in Russia, Europe and the US fell by more than a third last year. “With their cost levels, they can sell in any market,” says Sergei Donskoi, metals and mining analyst at Russian investment bank Troika Dialog. As a result of its efficient production platform NLMK has proved a stellar stock pick in the past year, with the firm’s London Stock Exchange global depositary shares up 143% in the 12 months to late April.
Another Russian player, coking-coal producer Raspadskaya, also made it into the top-five best-managed companies in New Europe, indicating that hapless management teams and egregious business practices are by no means endemic in Russia. “We believe the current shareholder structure and company strategy aimed at increasing efficiency and production volumes combine to ensure minimum corporate governance and oligarch risk,” says Denis Nushtayev, senior metals and mining analyst at Russian investment bank IFC Metropol in Moscow.
Raspadskaya is 40% owned by steelmaker Evraz Group, 40% by management and 20% by minority shareholders. Nushtayev adds that Raspadskaya is benefiting from the favourable combination of low production costs and strengthening domestic and international demand, with its first-quarter 2010 sales soaring 72% year on year to 2.23 million tonnes. “The company has a strong position on the domestic market, supplying as much as 65% of the Russian steel industry’s coking coal requirements,” Nushtayev says. “The company is also increasing exports, particularly to China.” As a result by late April Raspadskaya’s share price was up almost 50% year to date, easily outpacing the 11% rise in the benchmark RTS Russian stock index over the same period.
