Added value

The added value shows how much the final product or service increased in value due to the processes done on it within a company. Therefor the final value has to be checked and all raw materials added before have to be deducted from it.

Added value = net revenue +activated own performance + other income – expenditures of materials –other expenditures+ income from financial activities + extraordinary income.

Added value= income before taxes (EBIT) + personal expenditures + amortization.

Because in the Energy & Resources sector the giant company MOL alone would have caused significant changes in the values of the domestic owned firms, therefore it was excluded from the further examinations. The results can be seen on the next figure.

We can see that the added value is much higher in the manufacturing industry compared to the value created by domestic owned companies. There are no foreign owned companies represented in the public sector, and no domestic owned companies between the Technology, Media& Telecommunications sector’s companies. The domestic owned companies create a little bit higher value in Energy&Resources and Life Sciences & HealthCare, meaning that the foreign owned companies do not outsource their key functions in these areas.

Figure 13.: Added value by industries

Source: own construction based on Deloitte (2015) 10. Double duality

To be able to check the theory of double duality, we had a deeper look into the differences between foreign and domestic owned companies based on their export ratios. According to the theory, the markets, where the companies get their revenue from, can divide the domestically owned companies into two groups. One is the companies which manufacture to domestic markets; the other consists of companies who focus mainly on export. But the authors themselves also state, that this differentiation is not really significant. However, this does not

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apply to foreign-owned companies, where the segregation can be done based on other indicators. Figure 14 represents the results, where besides the ratio of export within the revenue the average wages were used. The export ratio shows the percentage of export revenues within the total revenues earned by each company. The average salary is calculated from the salary expenditures divided by the employee number from the annotation, which means an average amount paid to a person for a whole calendar year.

Figure 14.: Export ratio and average salaries for Hungarian companies

Source: own construction based on Deloitte (2015)

As we can see, some companies focus mainly on the domestic demands more than on exporting. We can even see 2 examples where export is completely missing (Szerencsejáték,Főgáz), and further 2 more where export is very minimal (Hungaropharma, MVM Paksi Atomerőmű). The majority is focusing on the domestic markets and only a few (20%) are more focused on export-orientation (MOL, Richter). Some are in between, balancing between export and inland selling.

If we examine the foreign-owned companies (Figure 15), we can see, that the majority is dominantly selling for the export markets, generating more than 80% of their revenues from abroad. There are a very few companies which do not export at all. (Panrusgáz, Auchan, E-on Kereskedelmi, ELMŰ), or very minimal (Tesco, Lidl, Spar, Phoenix Pharma)

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Figure 15.: Export ratio and wages for foreign companies

Source: own construction based on Deloitte (2015)

If an examination is conducted to the other main point of the double duality theory, which makes a difference between the foreign owned companies based on their added values, we get the following results. To get proof the other side as well, we also examined the case of added value for domestic owned companies as well. To be able to compare the results with the previous ones, we used the export-orientation on the horizontal axis again. We can see, that added value is not spreading on a wide range, but most of the most companies can be found in the lower sections. (Figure 16)

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Figure 16.: Export ratio and added value for Hungarian companies

Source: own construction based on Deloitte (2015)

However, the case for foreign-owned companies, the range is much wider than in the case of export orientation, resulting in a better differentiating criterion, than the market-focus was.

We can see that a group of companies produces higher – value products or services, which means a higher-value being added to the end results, while other are creating lower-value. These are simpler, low-skilled work requiring processes. For example: the case of Nokia factory, where only mobile-phone parts are put together, but no research and development is carried out in Hungary, which is demonstrated in Figure 17.

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Figure 17.: Export ratio and added value for foreign companies

Source: own construction based on Deloitte (2015) 11. Conclusions

In the current study the double duality theory was tested for the top 50 companies in Hungary.

Due to not yet uploaded statements, the year 2014 was used for which all the data are fully available. The theory itself distinguishes the companies based on their ownership and then puts further split for the domestic owned ones based on the main revenue generating markets and for the foreign owned ones based on the value they are adding. We saw that the foreign owned companies are dominant (40) compared to the domestically owned ones (10) both in numbers and also in size (except for the energy sector due mainly to MOL), and also their return on equity ratios (ROE) are better.

We saw that the economic crises affected both company types making them very careful – which could be spotted by the too much money owned afterwards, and mainly long-term financed assets. It can also be recognized, that due their special situations, foreign owned companies use internal financing more – by getting the sources from their mother companies.

As in relation to the double duality theory, we could hardly make a difference within the domestic owned companies based on their markets. The main reason was that they barely export. On the other hand, foreign owned companies sell mainly for export markets (specially the manufacturing industry), so a bigger difference between them could be made based on the added value created.

184 REFERENCES

1. Reszegi László - Juhász Péter (2014): A vállalati teljesítmény nyomában. Alinea Kiadó.

Budapest

2. Katits Etelka - Szalka Éva (2015): A magyar TOP 100 pénzügyi elemzése 2008-2013 között, avagy a növekedési lehetőségek feltárása. Saldo Kiadó. Budapest. pp. 26.

3. Sávay Balázs – Bartakovics Gábor – Sávay Dávid (2015): Analysis of Impact of the Crisis on Top50 Companies in Hungary. In. Gazdaság és Társadalom 2015/4. Sopron. pp. 32-52.

LITERATURE

Deloitte’s website. 2015. – HU-CETOP500-2014-finalreport. Retrieved April 18, 2015 (http://www2.deloitte.com/hu/hu/pages/deloitterol/articles/deloitte-kozep-europai-top-500.html) Katits Etelka – Szalka Éva (2015): A magyar TOP 100 pénzügyi elemzése 2008-2013 között, avagy a

növekedési lehetőségek feltárása. Saldo Kiadó. Budapest.

Reszegi László – Juhász Péter (2014): A vállalati teljesítmény nyomában. Alinea Kiadó. Budapest.

Sávay Balázs – Bartakovics Gábor – Sávay Dávid (2015): Analysis of Impact of the Crisis on Top50 Companies in Hungary. In. Gazdaság és Társadalom 2015/4. Sopron. pp. 32-52.

Lectured by: Törőné Dr. habil Dunay Anna Associate Professor, Szent István Egyetem Gazdaság- és Társadalomtudományi Kar Üzleti Tudományok Intézete

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Izabella Tebeli, Dr.¹⁹