Opportunities and challenges for large (domestic) industry companies
Study shows that consolidation may lie ahead for the sector in Brazil
The energy sector in Brazil is facing a difficult dilemma. At least this is what the German strategy consultancy Roland Berger diagnosed as a result of its recent study. Initially conducted among 300 companies from many different countries around the world, the consultancy's survey indicates that companies located in Brazil will be facing either a scenario of growth and consolidation between 2007 and 2010, or a new round of crises and stagnation, situations still well known from the era of energy rationings the country experienced in 2001.
António Farinha, consultant at Roland Berger in Brazil, explains to Valor Econômico that the scenario that will ultimately prevail depends on various factors. Any variety of combinations of market expansion, regulatory constraints, state interference and changes to the corporate landscape in Brazil is possible. But contrary to Brazil, the global energy sector is considered stable, the consultant adds.
The Brazilian version of this study conducted by Roland Berger is really a follow-up to an international survey in which several Brazilian enterprises took part as well. The consulting firm gathered the data of 300 companies worldwide with annual sales revenues exceeding USD 600 million. Of these, 191 companies were selected. "Our goal was to identify the groups with the best performance in terms of sales revenue growth and return on capital employed," explains Farinha. The Roland Berger survey found 40 companies worldwide that attain this level of excellence. Of these 40, 10% are located in China, 15% in Asia-Pacific, 45% in Europe, 20% in North America and 10% in South America, many of the latter being Brazilian corporations. The survey does not disclose the names of the participating companies.
Thomas Kunze, Partner at Roland Berger in Brazil, adds that the study will not be limited to just one edition. The intention is rather to update the survey's figures each year and to compare the participating companies every two years. "In Brazil, we will carry out both updates on an annual basis," Kunze assures.
Roland Berger is one of the five largest consultancies worldwide with annual revenues of EUR 530 million. It generates 10% of its revenues in the Americas, 25% in Asia and the rest in Europe. The company has 35 offices in 25 countries, with its only office in Latin America in Brazil.
The evaluations showed that the 40 leading companies in the sector achieved on average 19.4% in revenue growth between 2002 and 2005. The average ROE of this select group amounted to 15.2% over the same period. Just to give you an idea of what this implies, the energy companies with the lowest performance in the Roland Berger survey registered 5.5% in revenue growth between 2002 and 2005. The average ROE of these companies was 6.6% for the period under review.
"The survey shows that the best-performing companies have a strategic vision that anticipates future developments and engage in more active portfolio management. And they achieve operational excellence," says Farinha. To the Roland Berger consultant, the company who achieves top performance and manages to combine these three characteristics, will in future consolidate the global energy sector. And this is important for Brazil.
