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Key Sector Update


2001-03-01

Financial

The idea of privatising PKO BP, a bank, could be presented to the Polish government before the end of the first half of 2001. According to the Ministry of the Treasury, the sale of the first tranche of shares should take place before the end of the year.

Since 1 February 2001, MCI, a venture capital fund, has been quoted on the Warsaw Stock Exchange (WSE). It is the first such fund to be listed on the WSE.

Kredyt Bank, according to the president , is expected to generate net profits of around PLN 232 mln in 2001. This does not include income from the sale of over 90% of shares in Heros Life, the insurance company taken over by Tryg Baltica in January 2001. The bank is continuing the reconstruction of its subsidiary Prosper Bank and this will see at least two closures among Prosper’s 41 outlets before the end of the year.

BRE Bank generated a net profit of PLN 355.4 in 2000 and is to pay dividends of one third of its net profit value. No new shares will be issued before 2006.

BIG Bank GdaĹski reported a net profit of PLN 119.6 mln for the October 1999 to December 2000 period. This was considerably less than, for example, the net profit of PLN 168.7 mln reported for the period between October 1998 and September 1999. BIG BG capital group profits fell from PLN 337.1 mln for October 1998 to September 1999 to PLN 56.4 mln for October 1999 to December 2000.

At the end of March 2001, the National Bank of Poland will introduce new methods of eliminating risk at banks. Those exposed to foreign exchange risks will be obliged to have a minimum solvency ratio of 11% to 12%. The present ratio at the commercial banks is 8%.

On 18 January 2001 Mitteleuropaische Handelsbank was given permission to operate in Poland by the Banking Supervisory Commission. The new bank has been created by a pair of Polish banks, Bank Handlowy and Pekao S.A., and a pair of German banks, Helaba and Nord LB, to offer financial services for Polish-German trade.

In 1999 the ten main Polish banks issued over four million payment cards but last year this fell by half as the market became glutted. The market leaders are Visa Electron and Maestro.

Cigna, a Polish insurance company, is expected to have been taken over by Suomi, a Finnish insurance company, by the end of March 2001 Cigna is to change its name to FinLife by the summer.

At the end of January 2001 total net assets at pension funds were PLN 10.67 bln, almost PLN 750 mln up on the end of December 2000. The total value of shares in all pension fund portfolios was almost PLN 3.4 bln – around PLN 200 million more than the previous month.

Svenska Handelsbanken is to become the fourth Scandinavian bank operating in Poland. It will start by offering financial services to its corporate clients already operating in Poland. Later, it intends to win clients among Scandinavian companies active on the Polish market.

Credit Agricole, the biggest of the French banks, has bought 75% of the shares in Lukas, the main credit agent in Poland, for USD 262.5 mln. This also gives Credit Agricole control of Lukas Bank. In 2000, Lukas processed almost PLN 2 bln worth of credits, which gave it first place and a 28% share of the market. At the end of 2000 the Lukas group had assets of PLN 2,200 mln.

CDM Pekao S.A., the main Polish brokerage house, is to offer the wholesale transfer of brokers’ orders to the stock exchange, and perhaps a service for institutional clients. Small investors are to be served in the bank’s retail outlets and VIP outlets will open for the most active individual investors.

Bank Gospodarstwa Krajowego will declare a gross profit of around PLN 65 mln in 2001. In 2000 gross profit was recorded at PLN 130.6 mln. Over time the bank’s profits will decline as it grants the preferential credits it was set up to deliver.

At the end of 2000 the total assets of cooperative savings and loan banks were at PLN 1.2 bln and their 400,000 customers had almost PLN 992 mln deposited in 550 banks.

Pekao S.A. is to readjust its fees on Eurokonto accounts. From the middle of 2001 clients will have Internet access to Eurokonto Plus, VIP and Prestige accounts. The bank also has plans to strengthen its position on the leasing services market.

In 2000 mutual insurance companies selling property policies in Poland gathered over PLN 67 mln worth of contributions – more than 34.5% up on 1999. Rejent Life, the only mutual insurance company selling life policies, gathered 17% more contributions than in 1999. Half of the six mutual insurance companies operating in Poland reported a loss in 2000.

Bank Rozwoju Cukrownictwa (BRC), whose clients are mostly sugar companies, had losses of PLN 34.1 mln in 1999. It was then bought by Bank Handlowy and went on to generate a PLN 5 mln profit in 2000. Bank Handlowy will sell BRC after restructuring aimed at making it less prone to the fluctuations of the sugar industry.

The French Banque Populaire is to take 51% of the shares of the Social-Economic Initiatives Bank (Bank Inicjatyw SpoĹeczno – Ekonomicznych, BISE), which specialises in products for small and medium - sized companies, local authorities, foundations and associations. The issue of 38 million new shares for Banque Populaire will double BISE’s shareholder equity.

In 2000 the investment funds market grew as several new dividend funds were launched. Since the end of 2000 there has been a significant assets outflow from dividend funds and this has affected the whole investment funds market. At the end of January this year, investment fund net assets were worth PLN 4.98 mln - almost 30% less than a month earlier.

On 15 February 2001 Bank Wschodni shareholders decided to issue shares to increase equity capital by between PLN 40 and 50 mln. Most of the new shares are to be taken by a strategic investor. Before the issue the bank had capital of PLN 13.2 mln.

In 2000, the total net profit of commercial banks increased by 17.2% on 1999 figures. Total assets increased by 18.2% in nominal terms and by 8.9% in real terms. PKO S.A. is estimated to have generated the highest net profit and reported a figure of PLN 763 mln for 2000. This is four and a half times more than in 1999.

In 2000 the National Investment Funds (NFI) saw a 13% decrease in their investment portfolio value, a one per cent fall in total assets and reported a net loss of PLN 21 mln. Of the 14 NFIs four noted a loss.

In 2000 the cooperative branch of the banking sector held on to the 4.2% share of total sector assets it had in 1999. The total net profit of the cooperative banks was 50% higher than in 1999. In 2000 Gospodarczy Bank PoĹudniowo-Zachodni noted the highest net profit at PLN 63,000.

IT

Netia Mazowsze, a Netia subsidiary, is to start connecting clients in Warsaw in the next few weeks. The company has held a licence to operate there since June 2000.

Flextronics, a world electronic manufacturing services provider, is building a production plant in the Tczew Special Economic Zone (SEZ). The plant will produce UMTS mobile telephony equipment.

During 2001, the Vectra group, owner of TK Vectra S.A., a cable TV company, intends to invest at least PLN 100 mln in taking over local TV operators, network modernisation and the introduction of the Internet. The company’s revenue is expected to rise to PLN 89 mln this year.

On 6 February 2001 the Polish government accepted the draft bill concerning electronic signatures. From 1 July 2001 Polish citizens will have the right to electronic signatures.

Telekomunikacja Polska S.A. has begun a long promotional campaign scheduled to end in mid-July 2001. During it, Octopus, an ISDN technology-based data transmission system for companies, and Neostrada, a fast Internet access solution for private individuals and small businesses, will be demonstrated on a tour of ten Polish cities. It is planned that data transmission services will generate 25% of the capital group’s total revenue in 2005.

STGroup, an IT sector distribution company, intends to generate revenue of PLN 400 mln for the period August 2000 to July 2001. In the second quarter of the current accounting year the company generated revenue of over PLN 107 mln, 33% up on the same period of the year before.

In 2001, Computer Service Support (CSS), an all-Poland computer service company, intends to increase net profit by between 25% and 35% and sales by between 20% and 30%. In 2000, CSS generated profits of PLN 4.8 mln.

After negotiations lasting two months TeleDanmark of Denmark is to become the controlling shareholder of all the Softbank group Internet companies. The Softbank group is an important producer of management-support software. This will help Softbank to generate its planned net profits of PLN 52 mln and planned revenue on sales of PLN 490 mln.

Polska Telefonia Cyfrowa, a mobile telephony operator, is offering potential clients calls to one designated number for PLN 0.02 a minute. With PTK Centertel every second minute after the third is free to subscribers.

In the first half of February 2001, Telefonia Lokalna, an alternative telecommunications operator trading under the name ‘Dialog’, had over 136,000 subscribers. This was over 16% up on the end of 2000. The company is aiming to have 200,000 subscribers by the end of the year.

Food And Beverages

In 2000, fruit crops in Poland declined by 6% on 1999. Producer prices, especially those of apples and strawberries, were also lower. This meant that production of most varieties of fruit was unprofitable in 2000.

Hortex Holding, the market leader in juice, frozen fruit and vegetable production, intends to increase exports to Eastern markets by 70% by the end of May this year. From June 2000 to the end of January 2001, six tonnes of frozen products were exported to the East compared with four tonnes in the same period in the previous year.

To increase profitability and competitiveness Unilever Bestfoods Polska intends to lay-off 111 employees from its financial, personnel, sales and administration departments. Unilever Bestfoods has been operating on the Polish market as one company since 1 January 2001, when Bestfood merged with Unilever’s food branch.

Dom Inwestycyjny Kuchnia Polska, investor and advisor to Polish food sector entities, intends to sell four companies operating in the food sector and to purchase fish and ice-cream companies. They will be restructured and sold on at a profit.

In a response to the BSE threat the import and transit of beef gelatine, of beef and pork gelatine and of food articles made of animals and including such kinds of gelatine is now illegal. This took effect on 8 February 2001. The import of pork, poultry and fish gelatine is not banned on condition that the Chief Veterinary Surgeon grants permission and shipments are checked and have a health certificate.

Brodnickie ZakĹady Ĺťelatyny Sp. z o.o., the only Polish gelatine producer, ceased production of beef gelatine in January 2001. The company’s sales increased as consumers lost confidence in imported gelatine. In January 2001 the company produced 30 tonnes of gelatine compared to 10 tonnes in July 2000. Brodnickie ZakĹady Ĺťelatyny now has the capacity to produce 35 tonnes of gelatine a month.

There are over 4100 slaughter and meat processing companies in Poland. Large and medium-sized companies control 40.5% of the slaughter, and 60% of the production of meat preserves. The presidents of the largest of these companies estimate that in two or three years time there will be fewer than 20 important meat producers and processors. American, Swedish and German companies will be prominent as the market is divided.

Animex S.A., a meat and meat preserves exporter, has signed an agreement to buy OZD Continental S.A. of Opole, a poultry producing company, and Contipasz of GrodkĂłw, a fodder producer. This is in line with the company’s strategy to strengthen its position and increase its share in the white meat processing market.

The Warsaw Goods Exchange has introduced call and put options for consumable wheat. For the first time the issuer of the options is a private company. Before this, only the Agricultural Market Agency issued options.

In 2000, Okocim, a beer producer, noted a PLN 29.2 mln net loss owing to lower sales and additional costs. According to the management, the closing of the Chociwel brewery, company restructuring, employment reductions and the creation of reserves all contributed to the additional costs. Sales fell from 1.68 mln hectolitres in 1997 to 1.43 mln hectolitres in 2000. In the same period market share dropped from 9.7% to 6.0%.

In 2000 output of pure and branded vodka in the spirits industry fell to 65 mln dm3 from 80.7 mln dm3 in 1999. The financial situation of the whole branch worsened and only a few companies avoided reporting a loss. The industry is in a period of transition and it is likely that almost all of the companies in the industry will be privatised by the end of this year.

ZPC Pomorzanka of SĹupsk, a confectionery company that went bankrupt, has been bought by a company, KDC, that has been created by shareholders of the confectionery companies ZWC Milano and ZGC Edbol with the express purpose of buying Pomorzanka. The investors intend to create a strong Polish confectionery group.

FPC Kaliszanka, in confectionery and baking, is one of the few in its business to have reported a profit over the few past years. The company will invest PLN 25 mln in 2001, the same amount as last year. Kaliszanka is building a fifth wafer production line to meet demand.

Automotive

Ĺada Polska is to invest around PLN 4 mln in an assembly shop for GAZ lorries and UAZ touring cars. The plant is in the Starachowice Special Economic Zone and is to start operating in the first quarter of 2001.

Zasada S.A., the main Mercedes-Benz dealer in Poland, will begin exchanging deposit certificates for paper shares in the second quarter of 2001. Zasada S.A. came off the Warsaw Stock Exchange in May 2000. According to initial data the company may have generated a PLN 7 mln net profit in 2000.

In 2000, 1643 buses were sold in Poland. This is 25% more than in 1999. Autosan of Sanok is the market leader. The highest sales increases were noted in the town-, school-, and local bus segments.

In January 2001 31,700 new cars were sold in Poland, 19% less than in the corresponding month last year. For the first time, Fiat, whose sales declined by 37%, performed worse than Daewoo, where sales were 26% down. Car producers expect that 2001 will see a return to the sales levels of 1996 when 374,000 cars were bought.

Fiat Auto Poland is to lay-off 580 of its own employees and 170 FA Powertrain Polska employees. This is ten percent of the entire workforce. The decision has been taken due to the poor state of affairs on the Polish car market.

Construction

On 14 February 2001, Mostostal Zabrze, an important construction company, took over PRInĹź, a road construction company. Mostostal intends to merge with PIA Piasecki, a construction company. If formed, a construction group comprising Mostostal Zabrze, PRInĹź and PIA Piasecki would be the third biggest in the country.

Of the 38 construction companies listed on the WSE 13 reported a loss in 2000. Twenty-one companies did worse than in 1999. The sector as a whole reported output growth of 9%.

Source: ‘Rzeczpospolita’.



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