Profitability primarily indicates to what extent a company is able to produce and sell its goods in the market place for a profit. Broadly, it is a reflection of how well a company renders a product and/or service and to what degree it is able to generate sales. The EBITDA margin in this analysis is used as an indicator of profitability. The EBITDA Margin of Serbia’s economy stood at a solid 8% in 2013 – eight cents of EBITDA was generated per euro of sales. Average firms were not able to track the economy’s trends dictated by larger profitable firms, due to lack of possibility of becoming more competitive, in terms of production costs, market power, visibility and other key competitiveness factors which create gaps between small and large businesses.
The graph below provides an in-depth look into the profitability of industries in Serbia’s economy. It depicts the dispersion of industries according to the profitability of their average firms and the profitability of industry as a whole. The profitability of a vast majority of industries in Serbia’s economy was determined by the earning power of one or few large firms within those industries. The most profitable industries in Serbia’s economy are those that have most effectively and efficiently produced and sold their goods in the market place and thereby systematically achieved remarkable core profitability rates. They are located in sub-quadrant I (above the horizontal green line and to the right of the vertical red line) and exhibit profit margins that are above both averages for the economy. In addition, these industries have the greatest potential to spur economic growth through continued and increased activity.
Graph – Profitability of industries (2009-2013)