Three trends that will shape next year's TOP101

Villu Zirnask

Business journalist

A year ago I complained that the TOP101 ranking of Estonia's most valuable companies had excluded Synlab Estonia because it was late in submitting the annual report to the Commercial Register. This year Synlab did everything by the book, and climbed from 84th two years ago to the 21st position. In just two years, the company's estimated value increased fivefold, from 75 million euros to 376 million euros. Not bad at all!

However, judging by this year's declared VAT amounts, it may be difficult for Synlab to increase or even hold such value as the so-called “pandemic boost” is over. But the company is nevertheless doing well and will hopefully be ranked also in next year's TOP101.

It could be said that defense sector enterprises are currently operating in somewhat similar circumstances as Synlab in 2020-2021, i.e. responding to huge demand. Yes, there are no companies in Estonia that manufacture tanks or artillery, but this does not mean that there is no defense industry in Estonia. The Estonian Defense and Space Industry Association has more than 130 member companies, some of which are included in TOP101 (for example, Telia and BLRT) or TOP Tech (Skeleton Technologies). While they are not purebred defense companies, the borderline between defense and civil technologies is increasingly blurred and the movement of technologies is no longer 'one-way' as new technologies from national defense and space programmes are trickling down to the civil sphere. One can say it's now a two-way street as also civilian solutions are finding application in the military sphere.

The impact of the war in Ukraine on the turnover of companies operating more or less in the supply chain of defence-related products and services will not be as immediate as the impact of the pandemic on makers of facemasks or test kits, but it will be long-lasting. After all, weapons that Western countries are sending to Ukraine must be replaced, and national defense budgets are growing all over the world... It may not be long before we will see defense industries such as Milrem Robotics in TOP101 or TOP Tech rankings.

Another so-called hot sector now is energy. Yes, Eesti Energia that won the TOP101 in 2021 found itself in the 5th place this year, but this was mainly due to the fact that its daughter company Enefit Green which is now a listed company, is itself sixth. Combined, the two companies would have won the ranking hands down.

Given that the price of electricity started to rise in the second half of last year (after moderate increase in the first half), and that it has been painfully high for the whole of this year, it should not be surprising if Eesti Energia and Enefit Green would be ranked 1st and 2nd in the coming TOP101 while also other producers of energy carriers such as Graanul Invest (3rd place in 2022) and Viru Keemia Grupp (14th) will be also placed high.

However, when assessing the prospects of energy companies, it must be taken into account that they are operating in a regulatory and PR minefield. For instance, while before the energy crisis Eesti Energia kept low profile about the fact that it still produces electricity from oil shale (and at times it was unable to do so it because of the high market price), but fossil energy sources have now been quietly and temporarily rehabilitated. But how long will this "temporary" last? Green turn advocates, public angered by high electricity prices and politicians anxious to "help" the public, as well as environmentalists – there are many forces in this sector whose actions may affect energy companies in the future, and not always in a positive direction.

The third large trend that could shape the next year's ranking is rapid growth of interest rates. Because the financial sector is so concentrated, a large part of the sector is already on the list of the most valuable companies. In general, an increase in interest rates should have a positive impact on banks' profits, provided that the increase in interest, electricity and other costs does not put borrowers in an overly difficult position.