The pandemic changed Montenegro’s economy map: Labs made gains as hotel industry was placed on ventilator support

Pharmaceutical and IT industries have seen significant revenue gains, while hotels are spending their accumulated profits to survive. As many as 86 new companies have been founded in the IT sector, and laboratories have profited from PCR and other tests

By Marija Mirjačić

The pharmaceutical, IT and healthcare sectors are the biggest business winners on Montenegro’s disrupted economic map in the midst of the coronavirus crisis. Most other industries, such as retail, hotels, construction, transport, real estate, oil and petroleum products, telecommunications, have suffered significant losses.

This is the main finding of Vijesti’s analysis of last year’s financial reports of companies in Montenegro.

Such a picture is not surprising, given that the global economic crisis, which has been described as the most severe since the 1929 Great Depression, is the sum of the consequences of the coronavirus pandemic.

Revenues in pharmacy rose by €61.32 million

The pharmaceutical industry in Montenegro is mainly composed of trade in medicines and medicinal preparations and just one Hemofarm’s drug production plant. Most entities in this industry reported strong revenue and profit growth last year.

An analysis performed by BI Consulting, a provider of business and credit information within the project entitled “Montenegro’s 100 biggest companies”, has shown that in 2020, total sales revenue in the pharmaceutical industry increased from €320.19 million to €381.51 million (19.10%). Profits were up from €12.72 to €16.39 million (28.85%), whereas the number of employees rose from 1,786 to 1,960 (9.74%).

Data from the Statistical Office (Monstat) show that last year saw imports of €116,377 million worth of medical and pharmaceutical products, which is an increase of 8.3% compared with the previous year, when that value was 107,409 million.

The industry’s leading company, Glosarij, which specializes in the wholesale supply of pharmaceutical products, reported revenue of €84.32 million last year, an increase of 12 percent on the previous year, when it yielded €74.71 million. The Glosarij’s reported profits were €3.73 million, up 6% compared to 2019, when the company made €3.49 million.

Glosarij told “Vijesti” that their business had not been affected by the COVID-19 pandemic in 2020.

“We all know that this is a viral infection for which an effective cure is yet to be found. Also, we did not trade in COVID-19 vaccines, because this is not done through pharmaceutical wholesalers, but states instead perform procurement and distribution directly. As far as sales of vitamins and dietary supplements are concerned, we recorded a slight increase in sales, while overall growth was achieved as a result of an increased range of services and equipment,” Glosarij said.

The COVID-19 outbreak led to an increase in the consumption of zinc, magnesium and vitamin C and D supplements, but Vijesti could not obtain exact data on this. The Institute for Medicines and Medical Devices explained that they were not in charge of procuring medicines and medical devices. The state-owned Montefarm company, a pharmaceutical wholesaler with a network of 55 pharmacies, confirmed that there was a high demand for “a significant number of supplements that have a beneficial effect on the immune system,” without presenting specific amounts.

“One of the most sought-after supplements was certainly vitamin C, but also products containing zinc and selenium, which all saw a multiple increase in demand. Vitamin D in doses of 1000-10.000 units was especially popular, after it was recommended by medical experts as having a role in the prevention and treatment of COVID-19, but also as a post-Covid supplement for faster and easier recovery of patients. The turnover of this vitamin increased several times in the last year,” Montefarm said.

Montefarm pharmacies, as the company says, also recorded increased demand for herbal preparations, which “have a positive effect on immunity and boost its defensive power”.

Montefarm’s annual revenue jumped 10%, up from €73.58 million in 2019 to €81.34 million last year, while the profit for the same period fell by 31, down from €376.405 to €261,325.

The data from the analysed financial reports show that the revenue of private pharmacies also went up. According to one the chains, this was expected, because the pandemic, intensified by fear, caused the demand for medicines and medicinal preparations to increase substantially, especially in the first months.

“We had an onslaught at the beginning, but the situation normalized later,” the company management told Vijesti.

More than 120 new companies in the IT sector

The pandemic has also led to computers and laptops becoming priority devices in households, as many were and still are working from home due to the state of emergency, while children are attending classes online.

This has also caused the IT industry to generate significant revenue.

The analysis by BI Consulting also shows that the number of companies in this sector climbed from 495 to 621 (up 25.45%), sales revenue from €112.22 million to €126.048 million (up 12.32%) and profits from €9.72 million to €14.5 million (up 49.29%). The number of employees at the annual level increased from 1,512 to 2,074 (37,175%).

Comtrade Distribution, an IT company that generated the highest revenue in 2019, specializing in the wholesale distribution of computers, computer equipment and software, increased its profits from €373.403 in 2019 to €398,925 last year, which is a growth of about six percent, although its yearly revenue fell from €19.8 to €18.54 million.

Čikom, a company carrying out the same activity, increased its annual profits by as much as 60%, up from €561,678 in 2019 to €903,221 last year. Revenue was up 11 percent, from €7.88 million to €8.80 million.

Amplitudo, a company commissioned by the Ministry of Education to develop a web portal and a YouTube channel for the purposes of online teaching last year, reported total revenue of one million euros and a net profit of €197,000. A year earlier, their revenue was 925,260, while profits were €61.960.

“The main factor for the strong growth of the IT sector globally is the impact of the pandemic on everyday life and the way we use technology,” says Predrag Lešić, the CEO of DoMen company, which manages the .ME domain.

According to him, various services, such as messaging apps and video conferencing platforms, have enabled administrative and other jobs to be relocated without any problems.

“On the other hand, everything that needed to be digitalized in the course of next five years was digitalized in five months,” Lešić said.

Between March 2020 and March 2021, he says, when compared with the period between March 2019 and March 2020, 12.5% more websites were created, while the registration of domains intended for e-commerce websites increased by 23.65%. There has also been a slight increase in domains intended for blogging.

Lešić also points to the increase in domains that are registered and developed as websites and featuring words such as ‘webinar’ (19.23 percent), ‘freelance’ (9.15 percent), ‘e-learning’ (6.61 percent), ‘fitness’ (5.52 percent), ‘social distancing’ (2.83 percent) and ‘delivery’ (1.86 percent).

Coronavirus tests as a way to make big gains

Significant revenue was also generated by private clinics and laboratories offering complete examinations for those suspecting that they are infected.

Labs performing rapid antigen tests, which cost around €25, earned particularly well, while several private clinics offered PCR tests at €80.

Frequent advertising campaigns on billboards, television channels and newspapers, where PCR tests are now being offered at around €50, prove that this activity has resulted in a competitive race.

There is an especially high demand for serological tests, which are blood tests to check if a patient had an infection before. Their price ranged between 15 and 30 euros.

The Ministry of Health did not answer Vijest’s question as to how many new laboratories have been opened for the purpose of such analyses. They referred us to their website, which gives 12 addresses where a PCR test can be done.

“Of these institutions, the Institute of Public Health and the Kotor Health Centre belong to the public health system and they do not charge PCR testing services,” the Ministry said.

One of the first newly established private laboratories and polyclinics (in August 2020, in the middle of the pandemic) is Moj Lab, which is run by thoracic surgery specialist Milan Mijović. In five months, it generated revenue of €1.5 million and a net profit of €322,000.

The Institute of Public Health did not answer Vijesti’s question as to how many tests have so far been conducted in public health institutions and how many have been performed in private ones.

According to BI Consulting’s data, 86 new companies were established in the medical services sector last year, so now there are a total of 539 such companies. The number of employees in this sector has increased from 1,895 to 2,090 (10.29%), sales revenue from €39.47 to €48.65 million (23.25%) and profit from €3.47 million to €3.52 million (1.26%).

In May last year, Montenegro saw the opening of F.T.S. – a company specializing in the production of face masks. According to the Central Registry of Business Entities, its registered activity is “non-specialized wholesale trade” and its founder is Italian national Francesco Meleo. This company reported revenue of €693.380 and a net profit of €262,577 last year.

The information about this business was first made public last year by former MP and now acting director of the Revenue and Customs Administration Aleksandar Damjanović, who said that the company had not been entered in the Register of Medicines and Medical Devices.

Subsequently, the Capital City announced that they had made the first contact with the investor specializing in the production of masks at the Podgorica Investment event.

“The company “F.T.S.” bought two machines for the production of face masks for a total amount of 291,000.00 euros. “F.T.S.” is an export-oriented company, as all their main customers are from Europe and other parts of the world. It currently employs 12 workers,” the Capital City said in July last year, among other things.

Retail chains see a decline in turnover

The retail sector, which is traditionally the biggest industry in Montenegro in terms of the number of companies and employees, has seen a decrease in revenue and profits. According to BI Consulting, this area of ​​business generates €3.4 billion, which is about 40 percent of the revenue of all companies.

The Chamber of Commerce (PKCG) told Vijesti that the decline in demand in tourism had a negative impact on retail turnover. As a result, in 2020 it fell by 16.8 percent compared to the previous year.

The highest revenue among supermarket retailers was generated by Voli, which recorded an annual decrease of about 10 percent, from €242.39 million in 2019 to €218.70 million in the last year. The company’s profits in this period were slashed by half from €4.87 million to €2.46 million.

“The drop in turnover is the lowest in the industry thanks to great commitment of our employees across all structures of the company. Taking into account our results in the previous seven years and comparing this year’s parameters with that period, it can be concluded that 2020 was extremely difficult. It is clear that 2019 was a record year for many business entities in Montenegro, including our company, so it is not a reference value with which this year should be compared,” Voli said.

According to them, falling revenues have also led to a drop in direct costs, because they abandoned everything that was unproductive. Voli explains that they used the launch of five new retail stores in 2020 and €15 million in investments as a mechanism to mitigate the consequences of the pandemic. They also emphasized that they had the support from co-owners – the European Bank for Reconstruction and Development.

Financial statements have also revealed that Mercator ended the last financial year with a deficit of €7.37 million compared to 2019, when profits were €1.042 million. Franca’s saw its profits halved – from €1.55 million in 2019 to €772,630 at the end of last year.

The oil and petroleum products sector, which features several renowned international companies, is also making poor results. Jugopetrol, which is majority owned by Greece, saw a 47 percent drop in revenue, from €159.34 million to €84.79 million, with profits also being down from €4.32 million to €2.57 million.

Hospitality revenues slashed by half

According to the BI Consulting data, the hotel and catering sector saw the biggest drop in revenues last year, by an average of 55 percent. Hotels had it worse. A big loss was suffered by the largest hotel company in Montenegro, Budvanska rivijera, which owns five hotels, whose revenue fell from €21.95 million in 2019 to €2.96 million last year (down 87 percent). This state-owned company also reduced the number of employees from 599 to 412 (32 percent) over the same period.

“For the first time since 2003, we recorded a business loss and found ourselves in a situation that presented an insurmountable challenge. Thus, the balance sheet at the end of the last tourist year resulted in a loss of nine million euros,” Budvanska rivijera said, adding that they had recorded a €1 million profit a year earlier. According to them, liquidity was preserved thanks to the accumulated profits in previous years, along with additional austerity measures, reduced overheads and a reduction in salaries. The investment momentum of almost 40 million euros from previous years has been disrrupted.

Less food and drink

The food and beverage industry has also suffered significant losses. One of the reasons is that this sector is closely linked to the catering and hotel sectors, which generally did not operate during the coronavirus crisis, which is why they did not require big orders. One of the leading companies on this market, Coca-Cola HBC Montenegro, saw a drop in revenue from €29.31 to €19.97 million (32 percent), with profits of 1.17 million in 2019 melting into a minus of €126.17 thousand last year. The company told Vijesti that 2020 had been particularly challenging for the operation of companies linked to the tourism and hospitality sector.

This has affected their business as well. Yet, they continue to be a reliable partner to employees, customers, partners and the market.

“We have taken on the burden of the crisis. In particular, we have not reduced the number of employees and their salaries, we have settled all liabilities to customers and continued to invest in the market. We collaborate directly and indirectly with two and a half to three thousand customers and by deciding to meet all obligations to them, we have supported the survival of a large number of these businesses. We felt it was responsible to continue to support the community, even though our business was severely shaken by the pandemic. Together with the Coca-Cola Foundation, we have donated 50 thousand US dollars to the Red Cross and 15 thousand litres of drinks for health workers and those working in Covid institutions,” the company said.

Another big loser from this branch is Nikšić-based Trebjesa, which ended the last financial year with a loss of about €1.37 million, unlike in 2019, when it made a profit of 3.94 million.

Direct assistance only to the most vulnerable

Aleksandar Damjanović, a former MP and acting director of the Revenue and Customs Administration, told Vijesti that he had said several times in the Parliament last year that the consequences of the pandemic were not the same for all economic activities, which is now confirmed by companies’ financial statements for the last year.

“I pointed to certain sectors, such as pharmacy, IT industry, energy… which profited in some way, while others, such as transport and tourism, were brought to their knees. That is why I asked the former government to selectively target the most vulnerable companies and support the economy. Unfortunately, that failed to happen,” Damjanović said.

He expects that a comprehensive analysis of the winners and losers of the pandemic will help define a long-term support package, exclusively for those who need it the most.

“This may include special tax measures for vulnerable economic activities,” Damjanović pointed out.