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Key Sector Update


2001-07-01

Financial

Every quarter, the clients of open pension funds (OFEs) have the right to transfer their money from one OFE to another. During the transfer session that took place at the end of May 2001 the highest increase in client numbers was recorded by the OFE of Kredyt Bank (+7070), while PZU ZĹota JesieĹ OFE lost the most customers (-4105).

Nineteen of the twenty open pension funds recorded a positive rate of return in May this year. The value of an accounting unit increased on average by almost 0.9%. Losses were noted only in the case of Pioneer OFE. In the January-May period, however, the value of an accounting unit dropped on average by 1.2%, and only Rodzina, Pioneer, Winterthur, Commercial Union, and Sampo noted a positive change in the value of an accounting unit.

In the current year, two credit agent companies, Lumar of ĹĂłd and OSK of ZamoÂÄ, have closed down operations, while ARS of WrocĹaw is not certain whether it will remain in business. According to market analysts, co-operation with banks is a very important means by which credit agents can maintain a strong market position.

During the first quarter of 2001, the downward trend in sales of property insurance polices over the last two years continued. Of the biggest property insurance companies, Ergo Hestia and Allianz recorded the highest growth in contributions.

Bankowy Leasing (BL), a company owned by PKO BP, hopes to make available for leasing assets worth PLN 220 million this year, and to establish itself among the ten-top companies in the branch. In 2-3 years BL hopes to attain a top-three ranking. In 2000 BL's net profit was PLN 3.37 mln, while the value of leased assets stood at PLN 174 mln.

Cigna STU, an insurance company, is planning to become a market leader in terms of profitability. The company intends to specialise in the following areas: construction and transport, insurance for small and medium companies, and the public sector. Cigna hopes to sgenerate a net profit of PLN 3.2 mln in the current year.

Citileasing and Handlowy Leasing have initiated a process of consolidation and are expected to merge at the end of the third or the beginning of the fourth quarter of 2001 at the earliest. The new company will operate under the logo "Handlowy". In 2000, Citileasing recorded a turnover of almost PLN 240 mln, while the turnover of Handlowy amounted to PLN 181 mln. This leads to the conclusion that the new company should become the eighth largest enterprise in the branch.

The PoznaĹ-based Wielkopolskie Towarzystwo UbezpieczeĹ Ĺťyciowych i Rentowych Concordia Capital, an insurance company in the German Concordia group, has begun operations in Poland. The company hopes to generate a profit in 6-7 years, and within 10 years hopes to have become a medium-size company.

The State Office for Insurance Supervision has set up a commissionary executive in the insurance company Daewoo TU. This action was due to the rejection of Daewoo TU's plan of improvements and the lack of capital being injected in the company.

eBroker, a brokerage company, has launched its new insurance portal, www.ebroker.pl. The basis of the company's operations will be the sale of brokerage services via the Internet, and eBroker's revenues will be mainly from insurance sales commissions.

Enterprise Investors (EI) has sold its shares in Lukas Bank (28% of the bank's shares) to Credit Agricole for the sum of PLN 83.7 mln. In May 1997 EI bought those shares for USD 15 mln, and managed to increase their value by 5-6 times. The EI's average annual rate of return on investments amounts to 34% in USD, and 51% in PLN.

Inteligo hopes to have 150,000 clients in a year's time. BGB AG, the owner of Bankgesellschaft Berlin (Polska) which has a 49% share in Inteligo, is to spend another EURO 4 mln on the development of Inteligo, and claims that its plans will not be affected by BGB AG's problems. Inteligo hopes to have a 3% share on the retail market in 5 years time.

Multibank, the second retail bank of BRE Bank, is to commence operations at the end of June 2001. Multibank will have 37 outlets, including outlets without cashier service, which will offer clients investment advice. Another of BRE Bank's objectives is to open mBank Internet cafes in KrakĂłw and ĹĂłd this summer.

The merger of PTE Pocztowo-Bankowy and Arka-Invesco, universal pension societies, has been registered. The new society will operate under the name of Poczta Polska Cardif (BNP Paribas) Arka-Invesco PTE, which may be changed in the future. At first, the new society will manage the assets of the open pension funds of the two former societies. The merger of both funds is expected to take place within the next three months.

After several months of waiting, Uniqa of Austria has been granted permission by the Ministry of Internal Affairs to take over 90% of the shares in ZuiR Polonia. At the end of the first quarter 2001 Polonia recorded losses of PLN 2.94 mln. With regard to accumulated contributions, Polonia was the second largest property insurance company in 2001, with a 2.33% market share.

As of 1 July 2001 PZU, the main Polish insurance company will increase the price of passenger car owner OC (automobile liability insurance) contributions. PZU has an 70%+ share in the communication insurance market, and provides the basis for competitors' prices. This time, however, an increase in contribution prices is not expected in many other insurance companies.

After a two-year period of restructuring, which resulted in a decline in the growth of contributions and a loss of market share, the insurance company Warta intends to develop insurance policy sales. The company plans to develop its life insurance branch on the basis of the potential of the property insurance branch.

A new bank, DB 24, is to be launched on 2 July. Created on the foundations of the old BWR bank owned by Deutsche Bank, it will operate as a retail bank. DB 24 will offer services via a network of small outlets, through the Internet, and by telephone. DB 24 will offer a broader range of services than Inteligo and mBank. These services will be more specialised than the products of traditional banks. Another bank which will provide clients with an opportunity to make transactions via the Internet is LG Bank.

IT

Netia, Telefonia Lokalna, and El-Net, the three biggest independent telephone operators in Poland, that have paid EURO 300 mln into the state budget for concession fees, are demanding that the rest of their debt be cleared. This is due to the Law of 1 January 2001, which does not require potential new operators to receive concessions. Such a move puts also an end to protection from potential competitors.

Arena.pl, which was going to enter the Warsaw Stock Exchange (WSE), has not managed to do so. The share issue was to be worth over PLN 80 mln. One of the reasons that investors did not sign up for Arena's shares was Tel-Energo's statement that the agreement on E-connections, a company that was to be created by Arena.pl and Tel-Energo was unprofitable for Tel-Energo.

The telecommucations company Energis Polska (EP) has taken over Cel Polska, a company that owns a radio network in several major Polish cities. Moreover, EP would like to conclude negotiations with TP SA over long-distance calls, and start offering clients such calls at the end of the third quarter of 2001.

On 24 May 2001 Hoga.pl, a portal, entered the Warsaw Stock Exchange (WSE). It is another Internet company listed on the WSE, after MCI Management, Interia, and Getin.

Internet Group (IG) has created a new company, ZIGZAG.WEB. It will supply network services to firms. The overall financing of the project is expected to amount to PLN 2 mln.

MCI Management, a venture capital fund that finances technology and Internet projects is planning to create a group of firms connected with its portfolio company, CubeTeam. At present, CubeTeam's operations are mainly involved with making Internet portals. The group which will be created will be concerned with the integration of Internet projects; making portals, consulting, elaborating electronic commerce solutions, and Internet services outsourcing.

NiezaleĹźny Operator MiÄdzystrefowy (NOM), a future competitor of Telekomunikacja Polska S.A., intends to start operating at the end of June or the beginning of July 2001. NOM will make use of Tel-Energo's telecommunications infrastructure, which is one of NOM's shareholders.

The management of Optimus has come up with a plan for dividing up the company. The plan must be accepted by its shareholders in August. According to the plan, the assets of Optimus will be transferred to a new company, Optimus Technologie SA (OT SA). Shares in Optimus Technologie are to be listed on the Warsaw Stock Exchange on 30 November 2001.

Polkomtel, the operator of the Plus GSM mobile telephony network, noted a net profit of PLN 90 mln in the first quarter of 2001, PLN 55 mln down on the corresponding period of the last year. During the first quarter of 2001 Polkomtel spent PLN 144 mln on investment.

Pro Futuro, a telecommunications operator providing broad-band Internet access and data transmission on the basis of its own Infostrada Futuro network, has commenced operations in Katowice. This is the fourth city in which Pro Futuro is now active. By the end of 2001 the company intends to be present in Poland's 12 largest agglomerations. So far, Pro Futuro has spent PLN 120 mln on network development, and is to invest a total of PLN 500 mln by 2003.

Tele2 Polska, a subsidiary of the Swedish Tele2, has recently launched the Gadatek service, offering cheaper telephone connections in the Katowice telephone number area. The company has invested PLN 39 mln in Poland, and intends to spend another PLN 195 mln on, among other things, non-cable access to the Internet in the Silesia region.

Telekomunikacja Polska SA (TP SA), the main Polish stationary telephony operator, is plannign to acquire a 50% stock + 1 share in Wirtualna Polska SA (WP), a portal. TP SA wants to meet this target by taking the newly issued shares of WP and purchasing shares from WP's shareholders. Analysts estimate that WP is worth ca. USD 100 mln, and its main shareholders are the Prokom group (40%) and Centrum Nowych Technologii (49%).

Telekomunikacja Polska SA (TP SA) intends to increase the quality and speed of Internet access. TP Internet, a company of the TP SA group, is planning to provide services to individual clients (B2C, and C2C), while other companies, such as Marketplanet, a wholesale e-commerce center, are supposed to supply services for business clients (B2B).

The Swedish firm Telia, the owner of the Viking Network (VN), a global fibre optics network, intends to connect Poland to the VN by the end of 2001. The first stage in the construction of the Polish section of the network will cost ca. USD 30 mln.

Food And Beverages

A 10% increase in the excise duty on beer has been introduced. It is the second rise in the tax rate this year. The 8% increase in February resulted in beer prices going up by 5-8%.

In the first quarter of 2001 only one in five meat-branch companies listed on the Warsaw Stock Exchange (SokoĹĂłw) recorded a net profit (PLN 0.09 mln). The branch risks losing liquidity as banks have ceased granting credits to meat producing firms due to the branch's high risk nature. Meat producers say that better state regulations and higher exports might improve the situation in the branch.

Jutrzenka, Wawel, and Mieszko are the three confectionery companies listed on the Warsaw Stock Exchange (WSE). For over half a year these companies have registered higher and higher revenues on sales and recorded profits. These companies have recorded the best financial results of all grocery companies noted on the WSE.

During the first five months of 2001 the Ĺťywiec group sold almost 200,000 liters more beer than Kompania Piwowarska (respectively 3.0 mln hl, and 2.8 mln hl). Okocim is in third place with 0.65 hl, followed by Brau Union (0.57 hl).

Agros, a major manufacturer and supplier of foodstuffs, has signed a contract with Pernod Ricard, the company's investor, the Polmos companies and the Treasury, according to which Agros is to hand over the overseas rights of 21 vodka brands to the Polmos companies. Agros is to keep the rights only to the Wyborowa brand and hopes to take over 80% of shares in Polmos PoznaĹ which owns the rights to the brand in Poland.

Bakoma, a dairy products producer, has left the Warsaw Stock Exchange (WSE) as its profits are too low when compared to costs of going public. It was the only dairy producer listed on the WSE. Bakoma noted sales revenues of PLN 363.5 mln in 2000, 30% up on 1999.

Brau Union, the owner of three Polish breweries (Browary Warszawskie KrĂłlewskie (BWK) of Warsaw, Van Pur of RzeszĂłw, and Kujawiak of Bydgoszcz) has sold 430,000 hl of beer in Poland in the January-April period this year, 7% down on the corresponding period last year. Brau Union intends to merge the three breweries, and to sell 1.6 mln hl of beer this year. KrĂłlewskie, the BWK beer brand, is planning an intensive promotion campaign in order to turn it into a nationwide brand.

Browary Strzelec (BS), a company composed of two breweries, in JÄdrzejĂłw and in Rybnik, intends to sell a bundle of shares in the Browary Lubelskie PerĹa breweries by the end of the current year. This year the BS is to concentrate on improving its financial results and intends to sell 400,000-450,000 hl of beer, compared to 270,000 in 2000, and to secure a 2% share in the market.

Hortex intends to process over 220,000 tons of fruit and vegetables in its four plants in the current year. This would be over 20,000 tons more than the eight companies produced before restructuring two years ago. Hortex is also looking for a branch investor for separated divisions of the company.

Koneser, a Warsaw vodka producer, has started the production of vodka of the Stock company, a subsidiary of the German concern Eckes. Stock vodka will both be sold in Poland, and exported to Europe and the USA.

Sonda, a juice producer from ZduĹska Wola, is planning to expand production. It has installed two new production lines in WĹocĹawek, and intends to build two more. After the investment is completed, juice production is expected to increase by 30%, while the output of tomato products is to increase by half. Moreover, the company hopes to become the third largest company on the Polish juice market.

Enterprise Investor, the investor in the ice-cream producer Zielona Budka (ZB), has, by buying shares in ZB, invested most of the promised USD 10 mln. ZB's management has spent the money on improving the company's poor financial situation. Zielona Budka hopes to increase sales by at least 15% in 2001. By 2004 it intends to have 4,000 sales outlets, i.e. twice as many as it does at present.

Automotive

At the end of April 2001, sales of delivery vehicles were 32% down on the previous year. Sales of imported vehicles increased by 2.02%, while Polish producers recorded a 52.6% decrease in sales. While Daewoo Motor Polska has noted a sharp decrease in sales, Volkswagen sold 51.6% more vehicles by the end of April 2001 than during the corresponding period last year.

By the end of April 2000 346 buses had been sold in Poland, 10.8% down on the same period last year. The market leader is Autosan with 126 vehicles sold compared to 179 buses last year. Jelcz, Kapena and Mercedes noted an increase in sales compared to the January-April period last year.

By the end of April 2001 1771 trucks with a gross weight of over 6 tons were sold in Poland. This was 20.8% down on the January-April period of 2000. A slight increase in sales was noted in the segment comprising trucks with a gross weight of between 6 and 16 tons. With regard to vehicles over 16 tons in gross weight, sales were 24.7% down on the corresponding period of 2000.

Jelcz and Autosan, Polish bus manufacturers, have won a tender to supply 143 school-buses worth PLN 35 mln to the Ministry of Education. Jelcz is to produce 50 vehicles, and Autosan - 93 buses by the end of August.

Daewoo Motor Polska (DMP) had already dismissed 900 employees in the first few months of 2001 before it decided to reduce employment by a further 800 people out of a total staff of 2,900. DMP had planned to produce 1,000 cars a month this year. However, it had only managed to produce a total of 1,140 vehicles by the beginning of June.

Since 1 June 2001 Pol-Mot Holding has been a strategic investor in Daewoo Motor Polska (DMP). Pol-Mot intends to increase DMP's initial capital by USD 20 mln and buy a 75% stake in the increased capital. In order to do so, banks must sign a contract with DMP to restructure DMP's debt, and DMP must obtain Treasury guarantees for new credits worth about PLN 130 mln.

Krzysztof Olszewski, President of Neoplan Polska (NP), a bus producer from Bolechowo, is planning to re-gain total control over NP. Olszewski hopes to buy back the 30% stake in NP that was sold to Gottlob Auwärter, Neoplan's German owner, in 1999.

Âkoda Auto Polska hopes to sell 43,000 cars in 2001, 3,000 up on 2000, thanks to its new model: the Âkoda Fabia sedan, for which it has set a target of 4,000 sold units in the current year. Sales of other models are to fall by 1,000. As a result of innovative solutions, the Fabia sedan will be imported from the Mlada Boleslav plant in the Czech Republic.

Construction

In 2000, 87,800 homes were completed in Poland, 13% up on 1999. After the four first months of 2001, the number of homes completed was 33,514, 43.6% up on the previous year. However, it is becoming more and more difficult to sell new dwellings, especially in big cities, where a surplus of homes have been built. This surplus may disappear once the draft law currently being prepared on credit for people wishing to buy their own homes comes into force.

Echo Investment of Kielce intends to construct a residential quarter in Naramowice, via its subsidiary company Projekt Naramowice. The investment will cover an area of 50 ha, and will cost PLN 500 million. It is estimated that it will last 9 years. The first part of the investment, worth PLN 9 million, is to begin by the end of the current year.

Euro Bud Invest of Rybnik, together with its two subsidiary companies (Rybnickie PrzedsiÄbiorstwo Budowlano-InĹźynieryjne, and EBI-Trade) is planning to set up a holding. Cooperation between the companies is to begin with residential development in the south of Poland at the end of the third or the beginning of fourth quarter in 2001 worth PLN 24 mln.

Mitex, a Kielce-based construction company that has been performing well in spite of the deteriorating state of the construction market, intends to generate PLN 28 mln net profit in 2001. The company is planning an expansion in the energy construction segment and is interested in increasing operations in the environmental protection construction branch.

Mostostal Export (ME) has been implementing its new strategy of limiting operations to construction activities. ME has sold shares in financial institutions and hopes to sell the seven remaining companies of the Delia group. This year ME expects to record a 10% decrease in revenue amounting to PLN 1 bln in 2000.



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