Polish Business Survey

Alan Heath
16-10-2000, 00:00

Polish Business Survey

Getting carpeted

Management of the Kowary carpet factory have signed a distribution agreement with the American Show Industry. At the same time Kowary announced that they have concluded a contract with an investor who will put PLN25m into the reconstruction of the factory. The main current shareholder of Kowary is the Hetman national investment fund.

Robert Leńko, MD of Kowary says that he signed the contract with Show Industry which is the largest distributor of carpets in the world in order to reach institutional buyers such as hotels and offices. He is hoping that the American company may invest in his firm some time in the future. He states that finding a branch investor is a priority for Kowary although this may happen only after restructuring. This year losses will be around PLN5m — some PLN7m less than last year, therefore the entry of a strategic investor is not likely for a couple of years.

There are around 100 carpet producers in Poland, the largest of which are the Białystok based Agnella, Weltom from Tomaszów Mazowiecki and Zielona Góra based Novita.

Boom awaits motor industry

The auto market may be in a trough at the moment but the industry sees better times ahead. Poland is still well behind Western Europe on the amount of cars per head of population. It is even behind the Czech Republic where four years ago there were 0.3 cars per head of population, in Hungary today it is 0.28 whereas in Poland it is 0.24.

In the opinion of Wojciech Drzewiecki, MD of industry analysts Samar, car sales could still reach 1m units annually in Poland in a few years time. He compares the market to that of Spain where 900,000 cars are sold per year and thinks that Poland could reach that level within five years.

However before getting there, certain help is needed, especially from the government who should stabilise legal procedures and tax policies. He hopes that a project to tax new cars by four percent to raise funds for road repairs will not become law for example. Wojciech Drzewiecki says that this tax would only hit people who buy new cars whereas the roads are used by everyone. It is also still not clear if further excise increases are in the offing.

Several years ago the government made it easier for companies to assemble cars in this country. This of course was only a short term proposal and with falling customs duties on imported finished cars from the EU, it is no longer economically sensible to assemble here. Some auto manufacturers opted to produce cars making major investments here. The development of the auto industry could lead to better export figures especially in the field of parts.

The treasury plans to eliminate the already strict rules on leasing cars. Currently certain models may be converted to a ÔvanŐ and then used as normal passenger cars. Leasing is convenient for small businesses as it means that the whole VAT can be written off as an expense. Last year around 100,000 cars making about 15 percent of sales were leased cars.

Unlike many countries, the auto industry is a weak lobbyist in Poland. Wojciech Drzewiecki sees an urgent need for both importers and manufacturers to unite to put the industryŐs point more effectively to the government.

Cementing over the cracks

The forecast of a five percent rise in cement sales this year will not be realised, on the contrary a ten percent fall is now expected. The reason given: cheap imports from Belarussia and Ukraine.

Andrzej Tekiel, MD of Lafarge Cement Polska, claims that Ukrainian and Belarussian cement is a major risk for the construction industry as it has none of the certification required in this Poland. He claims that unless the appropriate legal, customs and buildings authorities do not do something, then soon there will be a collapse of the industry as happened in Hungary where within one year imports increased ten fold.

Jan Deja, MD of Polski Cement is threatening closure of one of his plants at the same time as cheap cement is coming over the eastern border. He thinks that if imports continue at current levels and the depression in the construction industry continues then many cement producers could find serious difficulties in paying back loans.

Tadeusz Radzięciak, MD of the Chełm cement works says that he has nothing against the import of the product provided that it is fair competition. In this case he claims that this import is unfair as it is produced in a way that would not be accepted in Poland. In Belarussia and Ukraine there is very cheap labour and power and companies are not investing in quality. In Poland around PLN800m was investment in cement production in 1999 alone.

NCC betting on motorways

The Swedish NCC has announced that it intends to gain a greater foothold on the Polish market through the purchase of local companies, especially those in the engineering sector. Janusz Puzia, MD of NCC Polska says that he is particularly interested in those in rail and hydrotechnical sectors. In the next few years the company plans to spend several hundred million złoty on new purchases. Over the past two years NCC has invested USD70m, the largest single cost being a forty percent stake in the Katowice based PRInż which cost over PLN50m. NCC hopes in time to get full control of the company. With motorway construction becoming likely the full acquisition of PRInż is increasingly important for NCC.

© ℗
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Podpis: Alan Heath

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