Poland Today Business Review+ No. 001

No. 001 / 2nd September 2013 / www.poland-today.pl / magazine, conferences, portal, newsletter

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MANUFACTURING & PROCESSING US engine component producer Dayco to hire 300 at new Tychy plant page 3

BANKING & FINANCE

Warsaw bourse to take 30% stake in UK-based Aquis Exchange page 3

ENERGY & RESOURCES ConocoPhilips reports positive flow rates at shale gas well in northern Poland page 4

PROPERTY & CONSTRUCTION

Polish BBI teams up with Flemish Liebrecht & wooD on PLN 450m project page 5

SERVICES & BPO

Arvato to create 100 jobs at Szczecin contact center page 7

TRANSPORT & LOGISTICS

Warsaw airport has more passengers than Prague, becomes CEE's largest page 9

CONSUMER GOODS & RETAIL Polish investors in talks on acquisition of Swedish home goods chain DUKA page 9

FOOD & AGRICULTURE Swiss giant Nestlé to spend PLN 300m on new pet food plant near Wrocław page 11

IT & TELECOM Regulator to auction new mobile frequency bands this autumn page 13

HEALTHCARE & PHARMACEUTICALS Czech Penta acquires pharmacies, hospitals and clinics in Poland page 13

POLITICS & ECONOMY

Fitch cuts Poland's outlook to stable as budget gap swells beyond forecast page 15

KEY FIGURES

Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 17-19

DCT Gdańsk seeks to boost its handling capacity to 4m TEU by 2016 Photo: DCT Gdańsk

World's largest ship arrives in GdańskWorld's largest ship arrives in GdańskWorld's largest ship arrives in GdańskWorld's largest ship arrives in Gdańsk Mærsk Mc-Kinney Møller, the world's largest container vessel, has called at Gdańsk on her maiden voyage from Asia to Europe, marking the growing importance of the DCT container terminal as the Baltic region's key marine transshipment hub. page 7

Polish economy on path to recoveryPolish economy on path to recoveryPolish economy on path to recoveryPolish economy on path to recovery With a seasonally adjusted year-on-year GDP growth of 1.1% in Q2 and better than expected industry performance in July, the Polish economy seems to have turned the corner. page 2

weekly newsletter # 001 / 2nd September 2013 / page 2

TOP STORY: ECONOMY

GDP growthGDP growthGDP growthGDP growth rebounds rebounds rebounds rebounds in Q2in Q2in Q2in Q2, July production , July production , July production , July production data pleasedata pleasedata pleasedata pleasessss analystsanalystsanalystsanalysts

Poland's economic growth accelerated in Q2 2013 with gross domestic product increasing 0.8% annually, up from 0.5% in the first quarter, the Central Statistical Office GUS said Friday. The seasonally adjusted gross domestic product grew 0.4% quarter-on-quarter in Q2 following a 0.2% increase in the first three months of the year. On an annual basis, seasonally adjusted GDP rose 1.1% in the three months to June after 0.7% ex-pansion in Q1.

Gross Domestic Product (y/y)

0%

1%

2%

3%

4%

5%

6%

Q2'09 Q4'09 Q2'10 Q4'10 Q2'11 Q4'11 Q2'12 Q4'12 Q2'13

Seasonally unadjusted Seasonally adjusted

Source: GUS

The improvement was mainly due to exports (+5.1% y/y), as domestic demand and investments remain weak. Poland's domestic demand fell 1.9% y/y in Q2 compared with a 0.9% decline in Q1, while fixed in-vestments declined 3.8% during the period, compared with a 2.0% drop a quarter earlier. Total consumption increased 1%, largely thanks to a 3.9% surge in public

consumption as, private consumption rose by a mere 0.2% y/y in the April-June period, compared with flat first three months of the year. In quarterly terms, domestic demand fell 0.7% from a quarter ago. Total consumption expenditure increased 0.3% q/q with consumer spending remaining un-changed. Gross fixed capital formation decreased 1.4%. Gross value added in industry in the second quarter was 2.6% higher than in Q1. Value added in construction rose 4.4%. A closer look at the GUS data reveals that the drop in investments was mainly due to austerity measures in the public sector, as corporate investments saw a mi-nor improvement. Most economists expect the recov-ery to gain pace in the coming months, supported by record-low interest rates. "We expect Poland's GDP growth to reach 1.5% in Q3 and 2.5% in Q4, adding up to a full-year figure of 1.4%. Next year the economy should expand by 2.5% and in 2015 we anticipate a 3.5% growth," commented Nordea's chief economist Piotr Bujak. July production beats projections July production figures provided the first indication that the country might indeed be back on the path of economic recovery. Poland's industrial output in-creased by 6.3% y/y in July, above the 5.2% y/y growth estimates. In manufacturing alone annual growth rate rose to 6.8% from 3.7% in June. The improvement is partly due to favorable calendar effects (in July there was on working day more than a year ago while in June calendar effects were neutral). Seasonally adjust-ed growth decelerated from 3.1% m/m and 4.5% y/y in June to 0.5% m/m and 2.8% y/y in July, but these are still decent numbers, according to Bujak. "Looking at breakdown by sections of manufacturing, the strongest growth rates were seen in sections with

large exposure to exports, which confirms that the main driver of economic recovery in Poland is some improvement in external environment of the Polish economy," he commented. Perhaps more importantly, after months of depression, July saw the first robust signs of recovery in the con-struction sector, where annual output growth im-proved to -5.2% in July from -18.3% in June (in sea-sonally adjusted terms to -7.3% from -16%), both sig-nificantly better than earlier projections. On a monthly basis in seasonally adjusted terms construction output rose 5% in July after 5.3% rise in June.

Industrial output & producer prices

-12%

-8%

-4%

0%

4%

8%

12%

Nov

11

Jan

12

Mar

12

May

12

Jul

12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

Jul

13

Industry output, y/y change

Producer Price Index, y/y change

Source: GUS

Analysts point out that the last time Poland's construc-tion sector posted similarly strong monthly growth rates was during the construction boom of 2011, when absorption of EU funds preparations for UEFA Euro 2012 were at their peak. The current revival seems to reflect reactivation of public road construction pro-grams and possibly also a long-awaited revival in cor-porate investments.


MANUFACTURING & PROCESSING

US engine component US engine component US engine component US engine component producer Dayco toproducer Dayco toproducer Dayco toproducer Dayco to hire hire hire hire 300 at new Tychy plant300 at new Tychy plant300 at new Tychy plant300 at new Tychy plant

Dayco, a Troy, Michigan-based supplier of engine components, has recently completed a brand new au-tomotive components unit in Tychy, in the Katowice special economic zone. Production at the plant, which is located at SEGRO Industrial Park Tychy is expected to begin in Q4 2013. Dayco, which manufactures belts, hose, tensioners, pulleys and timing belt components for passenger cars, light- and heavy-duty trucks and vans, seeks to recruit 100 staff by the end of 2013 and triple that number over time. Recruitment is currently underway with job openings in engineering, technical and production po-sitions. Spread over some 20,000 sq.m, the Tychy fac-tory will produce pulleys and dampers for the most popular original equipment manufacturer (OEM) cus-tomers in Europe. "We are looking for specialists with knowledge of ma-chining processes, plastic metal forming and vulcani-zation. But more than anything, we are looking for people with passion, with teamwork attitude, candi-dates who want to build a new company and are not afraid to take new challenges. We believe this is an unique opportunity to create a company’s culture to-gether," Dayco Tychy representatives said. Dayco is the largest division of Mark IV Industries, Inc., a USD 1bn manufacturing company headquar-tered in Amherst, New York. Mark IV is a global lead-er in engine technology solutions targeted at primary

and accessory drive systems for power transmission and air intake and cooling systems for the worldwide automotive and heavy-duty OEM market and automo-tive aftermarket. As of 2011, Dayco had 18 factories, 10 distribution centers and four major technical centers globally. With annual revenues of more than USD 920m, the company employs some 3,100 staff across 16 countries. Europe generates more than a half of Dayco's sales. Dayco’s Aftermarket division has been present in Poland with sales office in Warsaw.

Dayco's new plant will launch in Q4. Photo: SEGRO

SEGRO Industrial Park Tychy belongs to Britain's SEGRO, a major owner, asset manager and developer of modern warehousing and light industrial proper-ties. The property is located in 13 hectare site in close proximity to the National Road 86, just 22km from Ka-towice and offers 56,000 sq.m of flexible business space which meets both warehouse and production requirements. SEGRO entered Central Europe at the beginning of 2006. Currently the company runs investments in such strategic locations as: Gdansk, Gliwice, Lodz, Ostrava, Poznan, Prague, Strykow, Tychy, Warsaw and Wroclaw. SEGRO owns GBP 4.7bn of assets principal-ly concentrated in London's Western Corridor (in-cluding the Thames Valley) and in key conurbations in France, Germany and Poland. It has 5.2m sq.m of built space and a passing rent roll of GBP 311m.

BANKING & FINANCE

Warsaw bourse to take Warsaw bourse to take Warsaw bourse to take Warsaw bourse to take 30% stake in UK30% stake in UK30% stake in UK30% stake in UK----based based based based Aquis ExchangeAquis ExchangeAquis ExchangeAquis Exchange

The Warsaw Stock Exchange has confirmed plans to take a 30% stake in Aquis Exchange, the proposed pan-European equities trading exchange, forming an alliance with the latter's founder Alasdair Haynes. The WSE is to pay GBP 5m for the said stake in a deal that values the London-based startup at GBP 16.5m. Under the terms of the agreement, WSE is to get 30% of the total vote at the Aquis Exchange general meet-ing and the same share of the company's profits and will have a right to nominate two non-executive direc-tors to the Aquis Exchange board. Aquis is eyeing an October launch but it is yet to obtain approval from the UK's Financial Conduct Authority to operate as a multilateral trading facility (MTF). So what's in it for the Warsaw bourse? The WSE said in a statement that the investment aims at diversifying sources of revenues and strengthening its recognition and international position in the global financial mar-kets. The agreement is in line with WSE’s strategic in-terest in developing a financial hub for Central Europe in Warsaw. Any potential plans of Aquis Exchange concerning operations in the region will be settled with WSE. "The Polish capital market creates huge opportunities for WSE and is definitely our main focus, however, in a competitive and highly challenging environment, business diversification at an international level is a must for our company. The recent acquisition of orga-nized commodity markets in Poland and investment in


Aquis Exchange are examples of this strategy. Interna-tionalization is also fundamental for the business we run. WSE is already the biggest exchange in the CEE region, with some 65% share in equity turnover (as at June 2013), but we are still looking for new opportuni-ties. Our objective is to do this with brave visionaries such as the Aquis Exchange team," said Adam Maciejewski, president and chief executive of Warsaw Stock Exchange. What is particularly interesting about the deal, is that it brings together two rather unlikely bedfellows. The original purpose of MTFs was to promote competition with incumbent exchanges and keep a check on their fees. Although it would seem that having WSE as its key investor could perhaps undermine Aquis Ex-change's independence, Alasdair Haynes argues this is not the case. "We are very pleased that WSE has chosen to partner with us as part of its international strategy. For us, in-dependence is an important principle and thus having an industry backer of WSE's caliber, but which is not a client or a competitor, is hugely beneficial. This in-vestment secures our position ahead of our launch in October. We look forward to working with WSE as we bring the subscription pricing model to pan-European equities," says Aquis Exchange chief executive Alasdair Haynes. The team behind Aquis had earlier built Chi-X Eu-rope into a leading platform of that kind in Europe. Their newest brainchild is hoping to shake up its com-petition by offering a mobile phone-style "pay for what you consume" data fee for traders. Launched in 2007, Chi-X Europe sold to Bats Global Markets in 2011 for USD 365m or approximately 180 times its earnings. Created in 1991 to facilitate privatization, WSE lists about 442 companies on its main market, including PKO BP, the largest Polish bank, and PZU, the coun-

try’s biggest insurer, with a combined value of about PLN 775bn. The number of companies doubled in the last decade, with 81 new listings in 2007 and 12 so far this year. The main shareholder in the exchange is the Polish Treasury, which holds 35% of its shares and a voting majority. The bourse was privatized in 2010 through an IPO. Since 15 April 2013 the WSE has been running NYSE Euronext's Universal Trading Plat-form, which allows Warsaw to accept high-frequency orders but also binds it through a technological part-nership with the global giant. Recently WSE has en-gaged in talks with the CEE Stock Exchange Group (CEESEG), which unites the stock exchanges of Vienna, Budapest, Ljubljana and Prague, regarding potential consolidation.

ENERGY & RESOURCES

ConocoPhilips reports ConocoPhilips reports ConocoPhilips reports ConocoPhilips reports positive flow rates at positive flow rates at positive flow rates at positive flow rates at Polish shale gas well Polish shale gas well Polish shale gas well Polish shale gas well

Is this the news Poland's nascent shale gas industry has been waiting for? According to Polish government sources, a ConocoPhillips well in northern Poland is flowing 8,000 cb.m of shale gas per day. Although the flow rate is not yet at a commercially viable level, it represents a very promising sign for those betting on a Polish shale bonanza. "A natural flow test was commenced on 21 July 2013 and as at 20 August the well was flowing at approxi-mately 300 cubic feet (8,490 cb.m) a day," confirmed Conoco's junior partner 3Legs Resources, adding that "preliminary analysis of the flow test data indi-cates an area of low conductivity in the vicinity of the well, potentially restricting the flow of natural gas into

the wellbore, which may be addressed in future well and completion designs." Drilled in June 2011 to a total measured depth of 4,080m, the Łebień LE-2H well includes a horizontal section of approximately 1,000m, which was success-fully placed within a five meter target zone within the organic-rich lower Palaeozoic shales. The well en-countered high gas saturations throughout the hori-zontal section. Sustained flaring was indicated in No-vember 2012.

Shale concessions in Poland held by 3Legs Resources

and ConocoPhillips. Photo: ConocoPhilips

"We are pleased to be conducting our third round of testing of the Lebien LE-2H horizontal well, where we are achieving a sustained and unassisted flow of gas. We are obtaining valuable new data from this test which will help us further to progress our understand-ing of the Ordovician O3, or Sasino, shale formation and its commercial potential. We continue to investi-gate possible ways of achieving improved flow rates from this and/or similar wells," commented 3Legs Re-sources chief executive Kamlesh Parmar.


Speaking on a visit to the test site on 27 August , Polish deputy environment minister and chief geologist Piotr Wozniak told Polish journalists the result was "very good news for Poland and European petroleum geolo-gy". Wozniak added that the fact that the well flowed for more than a month after only a short stimulation should encourage other explorers to tap Polish shale. Foreign minister Radoslaw Sikorski also visited the Lebien site earlier in August, illustrating the emphasis that the Polish authorities have been putting on shale gas development. In March 2012, 3Legs Resources relinquished a 70% stake in its Polish Baltic Basin concessions as Cono-coPhillips exercised its call option over the assets. The move saw operatorship of the Damnica, Karwia and the Lebork concessions pass to ConocoPhillips, with 3Legs retaining a 30% interest in the concessions. The three Baltic Basin concessions have seen four shale wells drilled, fracked and two tested with fund-ing from ConocoPhillips. "As a company, we are confident that we will be able to customize existing solutions to those on which the we deal in Poland," Malcolm Rice-Jones, commercial director of the Houston-based explorer told reporters back in July. However, he declined to provide an esti-mated date of commercial shale gas production. "We need another test drilling to confirm that the gas can be produced on an economically viable scale." Several international explorers have divested or re-duced their positions in Polish shale in recent months, including ExxonMobil, Marathon Oil and Talisman Energy, which has dented investor confidence alt-hough none of the explorers attributed their decision directly to exploration results. The Polish government, which sees domestic extrac-tion as a way to reduce the country's dependence on Russian gas imports, has been streamlining regulations

governing Polish shale to speed up the permitting pro-cess, and the country's Treasury has described shale development as a priority of Polish national interest.


BBI teams up with BBI teams up with BBI teams up with BBI teams up with Liebrecht & wooD on Liebrecht & wooD on Liebrecht & wooD on Liebrecht & wooD on PLN 450m pPLN 450m pPLN 450m pPLN 450m projectrojectrojectroject

The Warsaw-listed Polish property company BBI De-velopment has teamed up with Belgium's Liebrecht & wooD on the prestigious mixed-use Koneser pro-ject in Warsaw's Praga district. Over the past few years the two developers have developed a successful partnership successfully cooperating on the upscale office-retail complex Plac Unii in Warsaw, due to open in October 2013. The Koneser development encompasses the revitaliza-tion of former industrial buildings as well as construc-tion of new buildings at the historic Warsaw Vodka Distillery. According to the investors, it will be the first mixed-use complex in Warsaw combining four functions: residential, retail, office and cultural. Spread across a 5ha site between Ząbkowska, Nieporęcka, Białostocka and Markowska streets, the project will comprise over 300 housing units, 22,500 sq.m of retail and service space and 22,000 sq.m of of-fices. Liebrecht & wooD joins forces with BBI Development to develop the retail & office section of Koneser, which constitutes around 59% of the total space at the com-plex. The investment value is set at PLN 450m, and the completion of the project is planned for 2017. The Flemish investor has acquired close to a 50% share in the commercial section of Koneser.

"We are delighted to join the Koneser project. Our co-operation with BBI Development has up to now been very fruitful, and we are convinced that this is a per-fect foundation for the effective development of the key retail-office part of this project," says Marc Lebbe, managing director of Liebrecht & wooD. "We've been cooperating successfully on another pro-ject for over four years and we look forward to joining forces with Liebrecht & wooD in this exciting under-taking," says Michał Skotnicki, President of BBI De-velopment. "Koneser, which we have been fostering for the last few years have now all the prerequisites to become a unique landmark project of this part of War-saw."

The Koneser project will combine brand new devel-opments with pre-war industrial buildings. Photo: BBI

Over the past two decades the Liebrecht & wooD group has delivered over 440,000 sq.m of commercial space in Central Europe and Russia, and its current portfolio totals 274,000 sq.m and includes Jerozolimskie Business Park, Kopernik Office Build-ings, Manhattan Business & Distribution Centre, Flan-ders Business Park and Batory Office Buildings in Warsaw as well as retail projects, such the Morski Shopping Centre in Gdańsk. The Liebrecht & wooD Group also includes a real estate management compa-


ny WeCare, and the Fashion House Group, one of the pioneers of Poland's outlet centre sector. Besides the giant Plac Unii development in the city centre and Koneser in Praga, BBI Development's pipe-line includes a number of other, attractively located projects in Warsaw. The company seeks to develop an office and retail building Nowy Sezam at the junction of Marszałkowska and Świętokrzyska streets, at the site of the rundown communist era Sezam department store. Their other major future undertaking will be a 180-metre class A office skyscraper in the very centre of Warsaw, at the corner of Emilii Plater and Nowogrodzka streets. In the residential segment, BBI is developing luxury condos as part of its Rezydencja Foksal project near Warsaw's high street Nowy Świat.

DATA BOX: RETAIL SALES Polish retail sales increased at an annual rate of 4.3%

in July, a 3.8% monthly increase, the stats office GUS

said. The PAP analyst survey had shown consensus

expectations for a 2.7% year on year increase on a

2.4% month on month gain. In real terms, Polish retail

sales were likewise up by 4.3% y/y in July after a 2.6%

y/y increase in June, GUS added.

Retail sales in Poland (y/y)

-5%

0%

5%

10%

15%

20%

Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13

Source: GUS


Limited supply may Limited supply may Limited supply may Limited supply may push up retail rents in push up retail rents in push up retail rents in push up retail rents in WarsawWarsawWarsawWarsaw, says JLL, says JLL, says JLL, says JLL

Although the upcoming opening of Galeria Miejska – a 15,500 sq.m shopping center in Polish capital's newest mixed-use project Plac Unii project this autumn will raise the retail space market saturation in the greater Warsaw area from the current 435 sq.m to 444 sq.m per 1,000 residents, the figure still remains one of the lowest among major Polish cities, stresses Jones Lang LaSalle in their newest Warsaw City Report. One would think that with 1.588 m sq.m of modern re-tail stock across all market segments (shopping cen-ters, retail warehouses, retail parks and outlet cen-ters), representing 14% of the country's entire supply, shoppers and tenants should have plenty of options to choose from in Warsaw, but according to statistics that might not always be the case. Strong demand for modern retail space in prime centers in Warsaw keeps the vacancy rate stable at approximately 2%, which is one of the lowest when compared to Poland's other major markets. Warsaw's 35 shopping malls with more a GLA of 1.083m sq.m are still not enough to satisfy the seemingly insatiable demand from retailers. The second quarter of 2013 saw one opening of a small, convenience-type shopping centre in Podkowa Leśna – Galeria Podkowa (8,000 sq.m), as well as ex-tension of Auchan Łomianki (from 22,200 to 32,900 sq.m GLA). One of Warsaw's most popular shopping destinations, Galeria Mokotów is being extended by another 5,000 sq.m. On the second floor, the food court has been remodeled and new restaurants are successively being added. In addition, an enlarged and

revamped Zara store has opened, and a larger Peek & Cloppenburg is nearing completion. Besides the aforementioned Galeria Miejska in the city centre, no major completions are expected in Warsaw in the coming months. "The first half of 2013 was a period of stability on War-saw's retail market. There's been a growing tendency to extend and remodel existing projects and to refresh their offer, with the ongoing expansion of Galeria Mokotów as well as the recent facelift of the Klif Cen-ter being good examples of this trend. Blue City, Wola Park, Arkadia, Złote Tarasy, as well as Park Handlowy Targówek are continuously introducing new brands and services, while Galeria Wileńska is remodeling its food court," says Anna Wysocka, Head of Retail Agen-cy, Jones Lang LaSalle. "Another notable trend is the growth within the con-venience sector, i.e. small shopping centers located in residential areas. Such schemes are often located on the outskirts of the city, boosting the retail offer in Warsaw's satellite towns. We are also seeing growing importance of high street locations, especially Nowy Świat, Chmielna, Marszałkowska Mokotowska and Plac Trzech Krzyży." The retail market in the Warsaw agglomeration is driven by the purchasing power of its residents, which remains Poland's highest at EUR 9,294 per capita per annum, exceeding the national average by 61%. This is what continues to attract some of the world's top luxu-ry brands to the Polish capital, such as Louis Vuitton, which opened its 270 sq.m flagship boutique in the up-scale vitkAc department store on Bracka Street. According to Jones Lang LaSalle, prime shopping cen-tre rents for a 100 sq.m unit, for a fashion sector tenant located in a leading shopping centre, remain stable and trade at EUR 80-90/sq.m/month. The same rental lev-el is observed in prime high street locations. The


property consultancy argues that due to the upcoming re-commercialization of key retail assets, prime shop-ping centre rents are expected to increase further dur-ing the next months, reaching EUR 100 /sq.m/ month.

OUTSOURCING & BPO

arvato arvato arvato arvato to create 100 to create 100 to create 100 to create 100 jobs atjobs atjobs atjobs at SzczecinSzczecinSzczecinSzczecin centercentercentercenter

One of the largest business process outsourcing (BPO) companies in Poland, Germany's arvato, seeks to boost employment at its multilingual Szczecin contact center by some 100 before the end of 2013. "This recruitment follows a prestigious new contract we received from our key client, a leading global IT player. The new staff will provide aftersales customer services, among others," says Janusz Jankowiak, gen-eral director of arvato Polska and CEO of Bertelsmann Media. "Overall, we hope to create some 150-200 new jobs in Poland this year, but of course the final figure will be dependent on our clients and the pace of their expansion," Mr. Jankowiak tells Poland Today. arvato has embarked on a large-scale recruitment campaign, seeking employees with German, Spanish, Italian, Hungarian, Czech, Slovak, Russian, and French language skills. The company says professional experience is not an obligatory requirement, but good command of languages and excellent communications skills are an absolute must. "We guarantee our prospective staff a series of train-ings and workshops, full-time contracts and competi-tive pay," says Jankowiak.

The contact center in Szczecin currently employs some 200 staff and provides services to arvato's Euro-pean clients in 13 languages. It occupies two floors at Szczecin's landmark Pazim building, but the ongoing expansion has forced arvato to seek new offices.

arvato has more than 2,000 staff in Poland. Photo: arvato "In November we are moving to a new office building in Szczecin, but we would prefer not to name the loca-tion yet. It will be announced in due time." Irish Independent has reported recently, that arvato would be shedding some 140 jobs in Ireland next year as more processes get relocated to Poland, where wage levels are more competitive. Since the Irish arvato units in Ireland are serving IT giants such as Google and Microsoft, we asked Mr. Jankowiak whether the planned expansion of the Szczecin center is related to the downsizing in Ireland. "These are two separate issues. The relocation from Ireland is being handled at the global level and it has nothing to do with our growth in Szczecin," arvato Polska's CEO tells Poland Today.

arvato Polska is part of arvato AG, a subsidiary of the German media giant Bertelsmann. The company has been operating in Poland since 1994 and offers a wide range of outsourcing service in IT, mass mailing, dis-tribution, customer service, as well as contact center, document management and financial solutions. arvato Polska has four contact centers, three service & distri-bution hubs, and one financial BPO unit in Poland, employing more than 2,000 staff across eight loca-tions. Its 2012 revenues totaled PLN 160m. "All of our Polish centers are experiencing growth. For instance, our service & logistics unit in Plewiska near Poznań has been wining new contracts from e-commerce clients, our BPO centre in Poznań has seen growing volumes of financial BPO operations, includ-ing debt recovery, whereas in the healthcare segment we are expanding operations at our consignment cen-ter in Błonie near Warsaw, which targets pharmaceu-tical companies."


Maersk Line brings the Maersk Line brings the Maersk Line brings the Maersk Line brings the world's largest ship to world's largest ship to world's largest ship to world's largest ship to DCT GdańskDCT GdańskDCT GdańskDCT Gdańsk

The world's largest container vessel Mærsk Mc-Kinney Møller has called at Gdańsk on her maiden voyage from Asia to Europe, marking the growing im-portance of the DCT Gdańsk container terminal as a key marine transshipment hub for Poland and the Bal-tic region. It was only two years ago when Maersk Line, the shipping unit of Danish conglomerate A.P. Møller-Mærsk A/S, placed an order in South Korea for 20 of the so called Triple-E class vessels, each with a capaci-


ty of 18,000 TEU (20-foot containers), 16% bigger than Maersk's largest container vessels to-date. The name stands for "Economy of scale, Energy efficiency and Environmentally improved, as the Triple E ships are approximately 20% more fuel efficient per container than the most fuel efficient vessels the Danes have been using so far. "The introduction of the world's most efficient vessels is part of Maersk's drive to optimize our fleet. This is matched by our continuous efforts to optimize the en-tire network, in order to offer stable, reliable and con-sistent service to customers," commented Thomas Bagge, Managing Director of Maersk Line in East Cen-tral Europe and head of Maersk Polska. "Mærsk Mc-Kinney Møller will operate on our AE10 Asia-Europe service, which includes also Gdańsk," says Marko Mihajić, Communication and Campaign Manager, East Central Europe at Maersk Line. "As for the subsequent Triple E vessels, decisions on their al-location will be made gradually, as they reach comple-tion." Gateway to Central Europe DCT Gdańsk's position as a key Baltic hub received a considerable boost in 2011, when Maersk decided to establish the first direct deep-sea container service from China to the Baltic Sea, serviced by the Danish company's first E-class type vessel Emma Maersk. Now the terminal has joined the prestigious group of merely 14 ports worldwide that will regularly receive the giant Triple E fleet. "The location and depth of water in the Port of Gdansk allowed DCT to assume position of a gateway to Po-land and to the entire Baltic Sea region. Now, with the Triple E vessels entering the Baltic, we are able to of-fer even more effective services," said Maciek Kwiat-kowski, President of the Board, DCT Gdansk.

Amid record-breaking transshipment volumes, DCT Gdansk gears up to embark on major investments next year that will see its capacity quadruple to reach 4m TEU by 2016. The 2012 saw the terminal handle 897,000 TEU.

DCT Gdańsk is well on its way to becoming the key container terminal in the Baltic.. Photo: aeromedia.pl

"In 2012 our volume rose 41% y/y, while at the same time Northern European ports experienced only mod-erate growth or stagnation. Our investments follow market demand for higher capacities and larger vessel sizes. Our target volume in 2013 is 1m TEU," Mr. Kwiatkowski told Poland Today's editor Lech Kaczanowski. Estimated at some EUR 250m, the planned phase two of DCT's construction is set to boost the terminal's an-nual handling capacity up to 4m TEU. The facility will be able to receive the world's largest container vessels, including the kinds that are still on drawing boards. According to the plans, the draught of DCT 2 will be 16.5m, with a 600-m quay. The top service at the ter-minal will be provided by seven Super-Post-Panamax gantry cranes with overhang of 25 rows of containers. The target annual capacity of DCT 2 terminal is esti-

mated to be 2.5m TEU. This, together with the exist-ing DCT terminal, will add up to an annual handling capacity of 4m TEU once the terminal is fully opera-tional. According to estimates, in a couple of years Gdańsk will be able to handle a half of the volume that currently gets transshipped in Hamburg.

Our investments follow market demand for higher capacities and larger vessel sizes. "At the end of last year our capacity increased from 1m to 1.25m TEU, thanks to utilization of additional con-tainer storage area. By the end of 2013 we plan to boost the figure by another 0.25m TEU, by expanding the storage area even further. If all goes as planned we in-tend to break ground on DCT 2 next year and com-plete it in 2016," said Kwiatkowski.

Poland's key container terminals Handling capacity (million TEU)

0.00 0.25 0.50 0.75 1.00 1.25

GCT Gdańsk

DB Port Szczecin

GCT Gdynia

BCT Gdynia

DCT Gdańsk

Source: terminal operators

Unlike the existing DCT1 terminal, which is an artifi-cial box pier protruding into the sea, DCT2 will be po-sitioned along the waterfront, reducing costs and of-


fering better access to larger ships. As far as additional infrastructure is concerned, Australian developer Goodman has recently completed phase one of its Pomeranian Logistics Center, a giant warehouse & dis-tribution project located at a 100ha site directly by the DCT. DCT Gdansk belongs to Global Infrastructure Fund II, managed by the Australia-based Macquarie Group. The construction of DCT1 began in 2005 and the ter-minal welcomed its first ship in June 2007. Total in-vestments to-date have come in excess of EUR 200m. The terminal offers year-round ice-free access with a 17.0m deep approach channel and up to 16.5m depth along the berth. The adjacent rail terminal, 4 x 1000m long is also operated by DCT Gdansk.


Warsaw airport beats Warsaw airport beats Warsaw airport beats Warsaw airport beats Prague on passenger Prague on passenger Prague on passenger Prague on passenger numbersnumbersnumbersnumbers

Warsaw's Chopin Airport has outgrown its Czech competitor in Prague, for the first time ever becoming the largest airport in Central and Eastern Europe. The Warsaw airport welcomed more than 5m passengers in January-June 2013 compared to 4.86m passengers in Prague. Since in July a further 1.2m people travelled via the Warsaw airport, the latter is likely to reach the 10m mark by the end of the year. Does this mean foreign tourists has suddenly discov-ered the unpolished gem the Polish capital would cer-tainly like to become? Well, not exactly. The surge in passenger numbers has mainly to do with the tempo-rary closure of Warsaw's second airport in Modlin, which forced low cost carriers: Ryanair and WizzAir

to use the Chopin Airport instead. Although before Modlin opened in the summer of 2012, Ryanair had re-fused to fly to Warsaw, citing elevated fees, it now seems very much at home at the Chopin airport. In the first half of 2013 the Irish budget airline carried 731,000 on routes to and from the Polish capital.

Air travel market in Poland Millions of passengers (2008-12: actual figures, 2013-20: projections)

0

10

20

30

40

50

60

2009 2012 2015 2018 2021 2024 2027 2030

Source: Civil Aviation Office (ULC)

Modlin, which had been designed as a low-cost alter-native to the Chopin Airport reopened a few weeks ago, but now neither Wizz Air nor Ryanair seem to be in a hurry to return there, saying they might consider it in their winter timetables. The much more centrally located Chopin Airport is simply more convenient for passengers and crews, whereas Modlin has earned some really bad publicity due to lack of proper landing systems (ILS) and runway problems, which have since been fixed. It seems to be just a matter of time, howev-er, before the low costs move back to Modlin, as most experts view their current hesitation as nothing but negotiation tactics. Besides the likely loss of Wizz Air and Ryanair, the Chopin Airport may face a yet another challenge in the coming months, one that has to do with its main client: Poland's national carrier LOT. Responsible for some

40% of traffic at the Warsaw airport, LOT is currently undergoing painful restructuring, which may result in one in four of its routes being discontinued in the next two years. In December last year the company re-ceived PLN 400m worth of public aid, and the Polish authorities may soon have to double that amount to keep the airline afloat. Since all public aid is being closely monitored by the European Commission, the government will have to make sure the streamlining does indeed take place. The expected drop in passenger numbers at the Chopin Airport is likely to be temporary, however, as the medium-term plan for LOT is to find a strategic investor. Aviation Week has reported recently that Etihad Airways from the United Arab Emirates may be interested in the Polish carrier. Last year Turkish Airlines and Air China were contemplating acquisi-tion of LOT, but eventually both gave up on the idea. Besides, Warsaw's importance as a regional business hub is bound to grow in the long-term, leaving behind Prague with its mainly tourist attractions.

CONSUMER GOODS & RETAIL

Polish investors take Polish investors take Polish investors take Polish investors take over Swedish home over Swedish home over Swedish home over Swedish home goods goods goods goods chain DUKAchain DUKAchain DUKAchain DUKA

Besides the flat-pack furniture giant IKEA, the Swe-dish DUKA chain was among the pioneers of Nordic home design in Poland, albeit in a more upscale mar-ket segment. At one point, almost every big city wed-ding list featured DUKA products, as the Swedes skill-fully explored the niche for pricey homeware . Hence, the news of DUKA's imminent takeover by Polish in-vestors came as a bit of a shock to the market, where the brand remains synonymous with Scandinavia.


The announcement came from Poland's competition watchdog UOKiK, which had received application from Polish company Grass to acquire DUKA from Sweden's Bergendahls group. Based in Płońsk, 50km north of Warsaw, Grass is a producer and retailer of home furnishings, bathroom fittings and luxury furni-ture. Its brands include Ravanson, Miloo, House & More and Imperial. Grass has established a separate entity Dom Deco to handle the DUKA purchase.

DUKA has 30 stores in Poland. .Photo: DUKA "DUKA's strategic objectives include gradual expan-sion of its Polish chain as well as entry into new mar-kets, such as Germany, Austria, Russia, the UK and the Baltic States by 2018. In the nearest future, we plan to relocate our store in Warsaw's Galeria Mokotów and open two new locations at Galeria Katowicka in Kato-wice and Gdynia's Riviera shopping centre," DUKA representatives said in a statement. The Duka brand offers a wide assortment of kitchen and dining goods, mainly kitchenware, glassware, din-nerware, cutlery and gifts. The company has 30 shops in Poland's best shopping malls as well as an online store, but despite annual sales of approximately PLN 40m it has been in the red for close to half a decade.

DATA BOX: INTERIOR GOODS

Poland's interior goods market shrank at the average

annual rate of 5% in 2010 and 2011, reaching PLN

12.6bn at the end of that period, according to market

researcher PMR. The decline was said to continue over

the subsequent two years with some improvement

expected in 2014. Worried about their jobs, the Poles

hold on tight to their wallets and fancy trinkets are

among the first items to fall off shopping lists.

DUKA's key competitor in Poland is the Warsaw-listed

retail giant LPP (owners of the Reserved, CroppTown,

House and Mohito fashion brands) with its Home&You

chain that boasts more than 70 shops throughout

Poland as well as 10 outlets abroad (in Russia, Ukraine,

Estonia, Czech Republic). Unlike the Swedes, who

focus on kitchen & dining products, Home & You sells

mainly textile home goods. Another major Polish

player, Ade Line, was badly hit by the economic

slowdown and had to shut down one of its chains

(Flo) and scale down the other (Almi Décor). Currently

there are an estimated 30 Almi Décor outlets in

Poland, but their number is to be reduced to 20 over

time. As far as foreign chains are concerned, Spain's

Inditex has opened seven Zara Home stores in Poland,

while Swedish H&M is to launch its Home line this

autumn, initially with four outlets.

Duka's history dates back to the 1920's when Swedish salesman Hjalmar Blomqvist started his first shop for glassware and porcelain in the town of Linköping in southern Sweden. The following years he continued to open stores under the Hjalmar Blomqvist Company logo which later became the foundation of Duka. In 1962 the Hjalmar Blomqvist stores teamed up with a number of other independent glass and porcelain re-tailers founded Duka, which by mid-1970s became a separate brand. Since June 2009 Duka has been part of Bergendahls, and currently the company does not have

any outlets left in Scandinavia, with Poland being its only market. Grass, which hopes to seal the transaction in the au-tumn, following an approval from UOKiK, will contin-ue cooperating with Bergendahls as a supplier. The family-owned Polish company plans to take the Duka concept to Germany, Austria, Russia, UK, and the Bal-tics and establish a distribution centre in Poland to support DUKA's expansion.

SERVICES & RETAIL

Panattoni building Panattoni building Panattoni building Panattoni building giant distribution hub giant distribution hub giant distribution hub giant distribution hub for Castoramafor Castoramafor Castoramafor Castorama

US warehouse developer Panattoni Europe has bro-ken ground on a new central warehouse for British-owned home improvement chain Castorama. Locat-ed in Stryków near Łódż, the 50,000 sq.m scheme (in-cluding 780 sq.m of offices) is "the biggest in the warehousing property sector since the beginning of 2013 and at the same time one of the biggest spaces ev-er built," the developer said in a statement. A leading player in Poland's industrial property mar-ket, Panattoni had earlier delivered a 80,000 sq.m project for Swedish fashion retailer Hennes & Mauritz, a facility dedicated to Tesco featuring 57,000 sq.m, as well as the 56,000 sq.m logistics centre for French DIY chain Leroy Merlin. So far, the Polish Castorama stores have been supplied from a distribution facility near Poznań, in the west of the country, but the company decided a more central location, at the junction of Poland's two key motor-ways (A1 & A2) will better serve its expanding busi-


ness and reduce overall logistics costs by some 16%. The giant new hub is due to be completed in Q1 2014 and with Łódź some dozen kilometers way, the facility will be able to tap into the abundant local labor pool. Panattoni Europe has already developed around 100,000 sq.m of space in Stryków.

From its distribution centre in Stryków Castorama will have easier access to all of its 72 Polish stores.. Photo: Panattoni Europe

"As the largest DIY chain in Poland, Castorama must have a logistics centre matching its needs," comment-ed Dariusz Barszczewski, logistics director at Castorama Polska. Earlier this year, Castroama's owner Kingfisher de-cided to wind up its second home improvement brand Brico Depot in Poland and include the existing outlets under that logo into its main DIY chain Castorama. The company currently operates 72 outlets and em-ploys 11,000 staff in Poland. Last year it added five new locations to the chain, and so far this year two new stores have been launched. "Our business in Poland remains a very strong per-former. Despite difficult markets our sales in Poland have increased from GBP 703m in 2008 to GBP 1bn (PLN 5bn) last year. Profit has risen from GBP 87m to over GBP 100m in the same period, though, profits did decline last year. Total store numbers have risen from

42 to 72 since 2008," Kingfisher's Nigel Cope told Po-land Today's Lech Kaczanowski.

Poland's key DIY chains Number of outlets as of end of 2012

0 10 20 30 40 50 60 70 80 90

Bricoman

Praktiker

NOMI

OBI

Leroy Merlin

Castorama*

Bricomarche

*) including Brico Depot Source: Cushman & Wakefield

"As a proportion of total capital expenditure the amount spent in our markets outside of the UK and France is actually increasing as markets such as Po-land, as well as Russia, Turkey and Spain offer good fi-nancial returns," says Nigel Cope. "Poland remains a very attractive home improvement market and Castorama Poland is a fantastic business with good prospects. It is a key market for Kingfisher. As with all developing economies things don't always move in straight lines. But the overall prospects in Poland re-main very attractive indeed." Kingfisher is Europe's largest home improvement re-tailer with some 980 outlets across Europe and Asia. Besides Castorama and Brico Depot its best known brands include B&Q and Screwfix. The group's Eu-ropean sales rose 0.5% last year, reaching GBP

52.22bn. Its Polish unit did only slightly better with a 0.6% increase in sales. In Poland, Kingfisher's key competitors are Germany's Tengelmann with OBI (43 units as of end of 2012), France's Groupe Adeo with Leroy Merlin (43) and Bricoman (5), German Praktiker (25), Polish NOMI (29). The largest chain is Bricomarche, operated by independent entrepreneurs under a shared logo from France's Groupement Mousquetaires. Newcomers include Swedish JULA, whose stores focus on DIY products and do not sell building materials.

DATA BOX: RETAIL WAREHOUSES

Total retail park and retail warehouse stock in Poland

at the end of 2012 stood at 2.3m sq.m of GLA, of

which 25% was in retail parks. Last year around 0.1m

sq.m of GLA in retail warehouse parks came on to the

market.

Large-sized, non-food stores are being developed as

free-standing buildings – retail warehouses or as part

of retail parks comprising from one or two to several

retail units. Free-standing buildings are dominated by

DIY chains. Sports equipment retailer Decathlon is also

a fast-growing chain, with five new openings in 2012.

Rents in retail parks at the end of 2012 were EUR 6–

8/sq.m/month for large space and EUR 9–13/sq.m/

month for medium-sized space. Limited rental

evidence shows that rents for free-standing retail

ware-houses are on average EUR 6-9/sq. m/month

depending on unit size and location.

According to Cushman & Wakefield, some 150,000

sq.m of DIY space is to be delivered to the market by

2015, mainly in retail parks in cities of less than

100,000 inhabitants.


FOOD & AGRICULTURE

Nestle to spend PLN Nestle to spend PLN Nestle to spend PLN Nestle to spend PLN 300m on new pet food 300m on new pet food 300m on new pet food 300m on new pet food plant near Wrocławplant near Wrocławplant near Wrocławplant near Wrocław

Nestlé has announced plans to build a new factory and distribution centre in Poland. The Swiss-based food giant hopes the investment will enable its subsid-iary Nestlé Purina PetCare to better penetrate the Polish pet food market, which with an estimated 13m cats & dogs is by far the largest in Central and Eastern Europe. The factory, an investment of PLN 300m, will be con-structed in Nowa Wieś Wrocławska near Wrocław, becoming the tenth Nestle plant in the country and creating 200 jobs. Nestlé has acquired a 15ha site for the project in July. Construction work will begin to-wards the end of 2013 with the goal that the factory will be fully operational during the second half of 2014. Nestlé has been present in Poland since 1993 and cur-rently operates nine plants in the country. The com-pany is known for its Nescafe coffee, ready-made foods and condiments under the brand Winiary, Ger-ber baby food products, confectionery brand Princessa, mineral water brand Nalęczowianka as well as Purina pet food. Nestle in Poland currently employs 5,100 people, of which 55 work for Nestle Purina PetCare. In 2012 Nestle Polska generated PLN 3.5bn sales revenues, up from PLN 2.7bn in 2011. Since its first entered the Polish market two decades ago Nestle has invested in excess of PLN 1.6bn in the country. Last year Nestle expanded its readymade foods and condiments plant in Kalisz and candy bar unit in

Kargowa. Besides the Wrocław plant, this year's pro-jects are to include a further upgrade of the Kalisz fac-tory as well as a new quality management center in Rzeszów, with a combined price tag of PLN 164m. Nestle Purina, with its global headquarters in St. Lou-is, USA, produces brands such as Pro Plan, Purina One, Friskies, Darling, Beneful, Dog Chow and Cat Chow. According to Nielsen, Nestle Purina brands have a 9.4% share in Poland's pet food market.

DATA BOX: PET FOOD SEGMENT With Poland's estimated 7.4m dogs and 5.7m cats

(according to Euromonitor), pet nutrition remains one

of the fastest growing segments of the country's food

sector. Last year it totaled approximately EUR 430m

and this year the figure is expected to come in excess

of EUR 478m.

As the society grows more affluent and pet food mak-

ers keep spending millions on emphasizing the superi-

ority of balanced, engineered food over scraps from

the master's table, the sector is set to grow at a dou-

ble digit pace for many years to come. In France, the

pet nutrition sector is worth some EUR 2.4bn while in

Germany – EUR 2bn. According to a recent survey,

some 68% of Poles own either a cat or a dog.

The leading pet food maker in Poland is US giant Mars,

which virtually created the market from scratch nearly

two decades ago with the introduction of its Pedigree,

Whiskas, Chappi and Kitekat brands. Following the

2008 acquisition of France's Royal Canin it further ex-

panded its presence in Poland where it currently con-

trols nearly 50% of the market. Listed Polish ready

meals makers Mispol and Pamapol are both develop-

ing pet food production capacities to offset the unsat-

isfactory growth in the convenience foods sector.

Poland Today talks to: Giorgio Vesprini, Country Manager Nestlè Purina Poland & Baltics • PT: Why has Nestlé Purina chosen this particular location for its new plant? Giorgio Vesprini: The investment supports Nestlé Pu-rina's long term ambition to deliver total category val-ue growth across both grocery and specialist channels to accelerate the overall pet food category value growth and our market shares in Western and Eastern Europe. Poland is the biggest pet food market in Cen-tral and Eastern Europe and was chosen for its signifi-cant potential for growth. The Wrocław area itself was selected for its close proximity to major roads, the availability of skilled labor, readiness of the site, as well as favorable investment climate. • PT: Although Nestlé Purina is number two on the Polish pet food market, your distance to the leader (Mars) remains huge. What is Nestle's long-term ambition as far as your share in the Polish market is concerned? GV: Nestlé Purina entered the Polish pet food market almost two decades after the market leader and has achieved a share of 9,4% in the Polish pet food market, according to AC Nielsen. We believe that with our in-vestment in this new site and our brands, we will con-tinue to grow our market share. The current level of calorific coverage in Poland [pet food industry prod-ucts consumed by our pets; ed.] is very low in compari-son with other markets and we have a good opportuni-ty to lead this evolution. In the longer term, the new facilities will enable Nestlé Purina to produce an ex-panded product portfolio. We will also export to Ger-many and other surrounding countries. • PT: The Polish pet food market has nearly doubled over the past five years. Do you think this pace of growth can be maintained?


GV: Poland has been the best growth performer within the OECD during the global economic crisis. Howev-er, GDP growth is projected to slow down in 2013. We estimate that the Polish pet food market will still grow, however, the pace probably won’t be double digit. • PT: Has the economic slowdown impacted Nestle Purina's sales and projections in Poland and the re-gion?

GV: Nestlé Purina PetCare has been present in Polish market for 16 years, offers a wide range of innovative brands. Polish consumer shows trust in the strong brands, what gives us high level of loyalty both in the grocery and specialist channel. These are our founda-tions of doing business in a sustainable way. It also helped us to achieved double digit growth despite the financial turmoil.

IT & TELECOM

New mobile frequency New mobile frequency New mobile frequency New mobile frequency bands up for grabs this bands up for grabs this bands up for grabs this bands up for grabs this autumnautumnautumnautumn

Polish telecoms market regulator UKE has launched a public consultation on a long-awaited auction, which will see all major local mobile operators compete for new frequencies. Poland will tender five 800 MHz frequency bands and seven 2.6 GHz frequency bands with a PLN 250m and PLN 50m asking price per band, UKE said in a statement. The licenses will be valid for 15 years and the frequen-cies offered during the auction may be used primarily to offer mobile broadband data transmission services, such as LTE. Each competing entity will be entitled to no more than two frequency bands in the 800 MHz

range and three frequencies in the 2.6 GHz range, UKE said of its draft tender documentation. Participants who already hold licenses in the 800 MHz or 900 MHz bands will be subject to stricter lim-its and can apply only for frequencies in the 800 MHz band, up to a maximum holding of 40 MHz in the combined 800 MHz and 900 MHz bands. Each 800 MHz frequency bundle will consist of two 5MHz fre-quency ranges, while each 2.6 GHz frequency bundle consists of two 10MHz bundles. Commercial launch of services is required within 12 months for the 800 MHz spectrum and 36 months for 2.6 GHz. The draft consultation document also in-cludes lists of municipalities that must be covered by the auction winners in the 800 MHz band within 12, 24, 36 and 48 months. Comments can be submitted un-til 1 October 2013. Earlier this year UKE awarded three frequencies in the 1,800 MHz band, required to build high speed mo-bile internet access (LTE), to Poland's smallest mobile operator P4 (Play). Another two frequencies were granted to Deutsche Telekom's subsidiary PTC, op-erator of the T-Mobile network. Besides the cash val-ue of each bid, UKE had been taking into considera-tion its contribution to competition in the sector. This is partly the reason why Orange, the mobile arm of the former monopolist TPSA) received no new frequen-cies. Currently the undisputed leader of Poland's LTE mar-ket is Polish Polkomtel, which was first to win fre-quencies in the 1,800 MHz band and start developing this type of 4G mobile services. Prior to the recent tender, 40% of the entire band belonged to Polkomtel and its partners (Cyfrowy Polsat and other business-es controlled by Polish billionaire Zygmunt Solorz-Żak), with PTC and TPSA group each holding a fur-ther 13%.

Experts believe that by 2016 all of Poland may be cov-ered by LTE services, as long as operators own up to their promises. The big question seems to be how is Play going to finance the development of LTE infra-structure, which is likely to cost way in excess of PLN 1bn. The dynamic operator, which belongs to Icelandic Novator and Greek Panos Germanos, may become an attractive takeover target for a cash-rich investor, should its current owners and creditors lack the finan-cial prowess to sponsor such huge investments.

HEALTHCARE

Czech Czech Czech Czech Penta Penta Penta Penta acquires acquires acquires acquires pharmacies,pharmacies,pharmacies,pharmacies, hospitals hospitals hospitals hospitals and clinics in Poland and clinics in Poland and clinics in Poland and clinics in Poland

Last year's EUR 400m acquisition of Polish Lux Med by British giant Bupa reminded financial investors that there's money to be made in Poland's healthcare sector. In recent months, the most active buyer has been the Czech-Slovak fund Penta Investments, which has just acquired a pharmacy chain Mediq Apteka as well as hospital and outpatient clinic oper-ator EMC Instytut Medyczny. Utrecht-based Mediq International agreed to sell its Polish business ACP Pharma to a consortium of Penta Investments and Polish pharma distributor Neuca. Following the PLN 432m transaction, which is awaiting approval from antitrust authorities, Neuca is to take over the wholesale arm of ACP Pharma (for PLN 203m) whereas Penta is to acquire the estimated 250 Mediq-branded pharmacies (for PLN 229) and make them part of its Dr. Max chain. "After completing current transactions, Dr.Max will be the 2nd biggest player on the Polish pharmacy market.


We expect that all newly acquired pharmacies will op-erate under Dr.Max brand and we assume that process of integration and rebranding of new pharmacies will take 12 months from closing of the transaction. Never-theless, the Polish market is far from consolidated, as out of more than 13,000 pharmacies, Dr.Max as the number two player, controls around 300 which repre-sents a 3.5% market share. We are ready to grow at the annual rate of 20 – 30 pharmacies and Penta is deter-mined to stay with Dr.Max project for at least five years. In Poland, there are many small pharmacy chains that operate less than 10 pharmacies. We con-sider them as attractive potential targets for Dr.Max," Eduard Maták, Partner responsible for Penta's healthcare portfolio, tells Poland Today.

Healthcare investments constitute more than 30% of the assets in Penta's CEE portfolio. We've invested more than EUR 400m in this sector. Dr. Max is one of the biggest pharmacy chains in Cen-tral Europe. It is a leader in the Czech Republic with a 25% market share and Slovakia (15%). With 2012 sales of EUR 620m and some 2,500 employees Dr. Max op-erates more than 500 pharmacies, including 70 in Po-land. The brand was established by Penta after first successful acquisitions of pharmacy outlets in the Czech Republic and in Slovakia. Penta has been in-volved in the project since 2005. Headquartered in Warsaw, Mediq Apteka operates 190 proprietary pharmacies and 79 franchise units with a combined turnover of some EUR 140m.

Formerly known as Torfarm, Penta's partner, Neuca is one of Poland's top pharmaceutical wholesalers. Listed on the Warsaw Stock Exchange, the Torun-based group employs some 3,800 staff and its key shareholder Kazmierz Herba ranks as 78 among the wealthiest Poles with assets estimated at PLN 350m. Commenting on the cooperation with Penta, Neuca's CEO Piotr Sucharski explained that his company does not intend to compete with its own customers – phar-macies – and therefore prefers to shed the retail busi-ness onto an outside partner. According to Q1 2013 da-ta, Neuca had a 26.2% in Poland's wholesale pharma market. Together with ACP Pharma's estimated 7% share, the Warsaw-listed distributor will consolidate its position as a number one player in the sector with a particularly strong position in the pharmacy segment. Hungry for more deals The Mediq deal is Penta's second major investment in Poland's healthcare sector this year. At the end of May the fund launched a public offer for the 85.4% of shares and 79.51% of voting rights in EMC Instytut Medyczny, one of Poland’s leading private healthcare groups. The bid, which valued EMC at about PLN 157m (EUR 37.4m), closed in July and boosted Penta's stake in the Wrocław-based business from 14.6% to 68.41%. Polish insurer PZU remains the second major shareholder with a 27.12% share. "We are satisfied with the transaction and our entry in EMC. We were desperate to acquire 100% of shares, as entering into a listed company, one must assume to ac-cept a broader shareholding structure. Our main goal was to gain control over EMC which was convincingly achieved. Currently, the shareholding structure is consolidated and we are glad that such a reputable brand as PZU has decided to stay with us and support the development of EMC. The company is a well es-tablished hospital operator in Poland and our aim is to take a very active part in the consolidation of the hos-pital segment through EMC," says Eduard Maták.

EMC Instytut Medyczny SA is the largest Polish- owned operator of hospitals and out-patient clinics on the country's private medical services market. In merely a decade, the company has developed from a local firm operating a hospital in Wrocław into a net-work of medical centers, being expanded consistently throughout Poland and abroad. Since 2005, EMC has been listed on the Warsaw Stock Exchange. At pre-sent, the EMC group comprises 8 hospitals and 16 out-patient specialty and primary care clinics.

Health expenditure* per capita In selected OECD countries as of 2011, in USD PPP

0 1,000 2,000 3,000 4,000 5,000 6,000

Estonia

Poland

Hungary

Slovakia

Czech Rep

Greece

Spain

Finland

UK

France

Germany

Norway

*) public & private Source: OECD

"We are ready to boldly support new acquisitions and the development of EMC's existing network. After fi-nalization of our public offer, we called a General Meeting, which already approved changes in the Su-pervisory Board. We have been starting talks with PZU about the long term strategy of EMC. After con-clusion of these talks we would like to move towards delisting EMC from WSE. We are convinced that due to the massive investments that are expected to sup-port company's significant growth, it would be reason-able to delist the company," says Mr. Maták.


Established in 1994, Penta is a Central European in-vestment group operating in the private equity and re-al estate sectors. In private equity, it manages an ever-green fund of its partners, the company's only share-holders. Its portfolio companies provide jobs to more than 30,000 people and reported revenues of EUR 4.4bn in 2012. Penta invests into retail, healthcare, aerospace industry, mechanical engineering, utilities, entertainment and banking projects. In 2012 Penta en-tered the hospital segment through acquisition of Svet zdravia, which operates 10 hospitals in Slovakia. The OECD estimates total health spending in Poland at 7% of GDP, compared to 9.6% in the UK, and 17.6% in the USA. According to PMR forecasts, in the years 2013-2015 the country's private healthcare market will be growing at a compound rate of about 5% annually, reaching PLN 39bn in 2015 (up from PLN 33.8bn in 2012). Besides UK's Bupa, the only international health care player in Poland is Medicover. Other pri-vate local chains (Enel-Med, Swissmed, Polmed) will sooner or later have to group together or find strong foreign backers in order to play an important role in consolidation and privatization of the sector. A growing number of local and regional hospitals are seeking private operators. It does seem like in a couple of years the market will be divided between a handful of major chains, integrating outpatient, diagnostic, and hospital services.

DATA BOX: UNEMPLOYMENT Poland's registered unemployment rate decreased to

13.1% in July from 13.2% in June, according to Central

Statistical Office (GUS) figures. The number of regis-

tered unemployed at end-July was 2.093m. According

to deputy Labor Minister Jacek Mecina Poland's un-

employment will rise slightly in September and Octo-

ber, and will likely close 2013 at or below 14%.

ECONOMY & POLITICS

Fitch cuts Poland's Fitch cuts Poland's Fitch cuts Poland's Fitch cuts Poland's outlook to stable as outlook to stable as outlook to stable as outlook to stable as budget gap widensbudget gap widensbudget gap widensbudget gap widens

Poland had its rating outlook cut by Fitch Ratings after the country's government had amended the 2013 budget, allowing the deficit to rise by some PLN 16bn, as the worst slowdown in more than a decade crimped state revenue. There is no cause for alarm, however, as all Poland's ratings remain comfortably within the 'investment grade' bracket. Fitch and Standard & Poor's rate Po-land at A-, while Moody's at A2. When Fitch raised Po-land's rating outlook to positive in February, it cited the government's successful deficit reduction and on-going reforms that may boost the economy's rebound from its current slowdown. The London-based institu-tion continues to praise Poland for its resilient econo-my, improving external finance and a solid banking sector. "The upward revision to deficit forecasts entails a later peak in gross general government debt than Fitch pre-viously assumed," Matteo Napolitano, an analyst at Fitch, said in the statement, adding that "the suspen-sion of debt limits has "reduced the credibility of Po-land’s rules-based fiscal framework." Poland raised the target for this year’s budget deficit in late August. The move was accompanied by PLN 7.7m in spending cuts, with lower defense expenditures representing close of a half of the total figure . The 2013 deficit cap is now at PLN 51.565bn, rather than the PLN 35.566bn planned initially.

The government first admitted that a weaker than ex-pected economy would derail its original budget plan back in July. The President signed an amendment to the public finance law which suspended automated fiscal safety rules that prohibit increasing the budget deficit once public debt tops 50% of gross domestic product. According to Finance Minister Jacek Rostowski the suspension would only apply to 2013 and 2014 and the safeguard threshold will remain in the amended public finance law. A new spending rule, to be adopted separately, will increase "flexibility" in lean years and restrict expenditures when the econo-my speeds up, Rostowski said back in July. The Polish constitution does not allow for the deficit to exceed 60% of GDP.

Debt & deficit-to-GDP ratios Official figures according to Eurostat methodology

2009 2010 2011 2012

GDP (PLN bn) 1,345 1,417 1,528 1,595

General gov't defi-

cit in % of GDP -7.4% -7.9% -5.0% -3.9%

Public sector debt

in % of GDP 50.9% 54.8% 56.2% 55.6%

Source: GUS, the central statistical office

According to Fitch, the suspension of the debt rule "could undermine confidence in the forthcoming per-manent spending rule, which the government intends to cover a much wider share of public expenditure than the current temporary one." The agency forecasts Poland's debt-to-GDP ratio will peak at around 56% in 2013-2014 rather than in 2011 as it previously assumed. The agency sees Poland's GDP increasing to 2.4% and 3%in 2014 and 2015 respectively from the 1.2% ex-pected this year. In a comment on the Fitch decision, the Polish Fi-nance Ministry said it disagreed with the agency that changes in the fiscal rules potentially weakening Po-


land's credibility. "The new spending rule, due to its anti cyclical nature, will serve sustained public finance discipline," the ministry said. The recent problems with Poland's state coffers have reignited rumors about the possible dismissal of Fi-nance Ministry Rostowski, but Premier Donald Tusk denied all media speculations on this.

ECONOMY & POLITICS

Warsaw mayor recall Warsaw mayor recall Warsaw mayor recall Warsaw mayor recall vote to take place in vote to take place in vote to take place in vote to take place in OctoberOctoberOctoberOctober

The national election commission in Poland an-nounced that a referendum on whether or not to dis-miss Warsaw Mayor Hanna Gronkiewicz-Waltz will be held October 13. The announcement came after the election commission determined that 166,726 valid signatures were gathered in favor of the referendum being held, surpassing the requirement of 130,000 sig-natures. In order for the results of the referendum to be valid, 389,480 Warsaw citizens will need to partici-pate in the voting. The campaign against Ms Gronkiewicz-Waltz was launched a few months ago by a group of local organi-zations that criticized Warsaw authorities for rising costs for public transport and waste collection as well as delaying completion of the second line of the War-saw subway. Poland's main opposition party, Law & Justice (PiS) quickly jumped at the opportunity and helped gather some 48,000 signatures. Opinion polls indicate the majority of Warsaw resi-dents want to remove the mayor, but the crucial ques-tion is whether enough people turn out to make the

vote valid. In a somewhat controversial statement, Prime Minister Donald Tusk urged people to refrain from voting. Besides running the Polish capital, Hanna Gronkiewicz-Waltz is deputy head of Tusk's ruling Civic Platform (PO) party and defeat in a referendum would damage the government's credibility, adding to pressure on Tusk to reshuffle his cabinet. If the vote proves invalid, Ms Gronkiewicz-Waltz will keep her position until her second term expires in late 2014. Even if she is recalled, there might not be an ear-ly mayoral election; a commissioner could be appoint-ed for the remaining year of her term. For both Donald Tusk and his archenemy Jarosław Kaczyński, the po-litical prestige at stake matters more than the outcome of referendum. As it became clear that the Warsaw referendum would indeed take place, Ms Gronkiewicz-Waltz embarked on a PR offensive, and dismissed a handful of high-ranking officials, but her sudden frenzy of activity seems much delayed and somewhat forced. After all, it is mainly her arrogance and poor communications skills that fuelled the recall movement, rather than any actual decision-making failures. A recent TNS Polska poll showed that the Warsaw mayor may indeed lose her job as 36% of Warsaw resi-dents, some 90,000 more than needed for the referen-dum to be valid, said they would take part in the vote. Of the remaining respondents, 42% said they would not vote in the referendum and 22% said they were not yet decided. Amongst those who declared their inten-tions to vote in the referendum, 65% said they would vote to oust the mayor and only 16% said they would support her. The move to recall Warsaw's mayor comes after cam-paigners in the northern city of Elblag successfully re-called their Civic Platform mayor in May this year. The resulting election was won by Law and Justice

candidate, Jerzy Wilk in July. Civic Platform is already trailing the main opposition party by a record 11 points in opinion polls, as the government struggles to cope with an economic slowdown and unemployment of about 13%. Although the government does not face general elections until 2015, investors, take a close in-terest in what happens to Tusk's party.

DATA BOX: INFLATION

Polish inflation accelerated in July from June's record

low, outpacing economists’ forecasts and sealing the

central bank’s case for ending interest-rate cuts.

Consumer prices advanced 1.1% from a year earlier

after a 0.2% increase in June, Poland's stats office GUS

said. The result was substantially higher than the 0.5%

median estimate of 33 economists in a Bloomberg

survey. Prices rose 0.3% from the previous month,

driven by a 48% surge in waste collection fees, which

resulted from a new law imposed on local

governments. According to Nordea Bank's Piotr Bujak

CPI inflation is unlikely to return to the inflation target

of 2.5% before the end of this year and no interest rate

hikes should be expected before Q3 2014.

CPI inflation in Poland (y/y)

0%

1%

2%

3%

4%

5%

Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13

Source: GUS, the central statistical office


KEY STATISTICS

Consumer PriceConsumer PriceConsumer PriceConsumer Pricessss

Data in (%) Apr '13 May '13 Jun '13 Jul '13

Sector y/y m/m y/y m/m y/y m/m y/y m/m

Food & bev +1.7 +0.4 +1.6 +0.7 +0.7 -0.3 2.5 -0.3

Alcohol, tobacco +3.6 +0.1 +3.5 +0.2 +3.7 +0.2 +3.6 +0.1

Clothing, shoes -5.1 +3.3 -4.8 +0.1 -4.7 -0.8 -5.0 -2.7

Housing +1.1 +0.1 +1.1 +0.1 +0.9 0.0 +2.0 +1.2

Transport -2.2 -0.6 -4.2 -2.3 -3.5 +0.4 -1.2 +1.1

Communications -7.3 10.0 -9.7 -2.6 -9.7 0.0 -9.7 0.0

Gross CPI +0.8 +0.4 +0.5 -0.1 +0.2 0.0 +1.1 +0.3

IIIInflationnflationnflationnflation

-1%

0%

1%

2%

3%

4%

5%

Jul 11

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

y/y m/m

Retail Retail Retail Retail TurnoverTurnoverTurnoverTurnover

Month Mar '13 Apr '13 May '13 Jun '13 Jul '13

m/m (%) +16.8 -2.7 +1.6 +1.5 +3.8

y/y (%) +0.1 -0.2 +0.5 +1.8 +4.3

Year 2008 2009 2010 2011 2012

Turnover in PLNbn 564.7 582.8 593.0 646.1 n/a

y/y (%) +13.3 +4.3 +5.5 +11.6 +5.6

Residential ConstructionResidential ConstructionResidential ConstructionResidential Construction

Dwellings

(in '000 units)

2008 2009 2010 2011 2012 Jan-Jul

2013

y/y

(%)

Permits 230.1 178.8 174.9 184.1 165.1 79.7 -22.3

Commenced 174.7 142.9 158.1 162.2 141.8 71.9 -21.8

U. construction 687.4 670.3 692.7 723.0 713.1 703.5 -4.4

Completed 165.2 160.0 135.7 131.7 152.5 81.1 +1.7

Source: Central Statistical Office (GUS)

GGGGross Domestic Productross Domestic Productross Domestic Productross Domestic Product

Period Growth y/y unadjusted

GDP in PLN bn current prices

Current account def. in % of GDP

Q2 2013 +0.8% 395,507 n/a

Q1 2013 +0.5% 377,815 -2.8%

Q4 2012 +0.7% 442,231 -3.5%

Q3 2012 +1.3% 393,792 -4.1%

2012 +1.9% 1,595,264 -3.5%

2011 +4.5% 1,528,127 -4.9%

2010 +3.9% 1,416,585 -5.1%

2009 +1.6% 1,344,384 -3.9%

Key Economic Data & ProjectionsKey Economic Data & ProjectionsKey Economic Data & ProjectionsKey Economic Data & Projections

Indicator *2010 *2011 *2012 2013 2014

GDP change +3.9% +4.5% +1.9% +1.0% +2.5%

Consumer inflation +2.6% +4.3% +3.7% +1.0% +1.9%

Producer inflation +2.1% +7.6% +3.4% -1.4% 1.0%

CA balance, % of GDP -5.1% -4.9% -3.5% -1.0% -0.1%

Nominal gross wage +3.9% +5.2% +3.7% +2.6% +4.0%

Unemployment** 12.4% 12.5% 13.4% 13.9% 13.5%

EUR/PLN 3.99 4.12 4.19 4.22 4.06

Sources: NBP, BZ WBK, GUS *) actual figures **) year-end

GrossGrossGrossGross WagesWagesWagesWages A: avg monthly wages in PLN B: indexed avg wages, 100=2005

Sector Q3 2012 Q4 2012 Q1 2013 Q2 2013

A B A B A B A B

Coal mining 5,920 135 8,427 192 6,060 138 6,290 143

Manufacturing 3,463 151 3,522 154 3,491 152 3,560 155

Energy 5,790 176 6,535 198 6,196 188 5,828 177

Construction 3,709 158 3,829 163 3,556 152 3,693 157

Retail & repairs 3,322 142 3,365 143 3,432 146 3,421 146

Transportation 3,543 125 3,816 135 3,439 122 3,547 125

IT, telecoms 6,493 169 6,379 166 6,685 174 6,707 174

Financial sector 5,875 132 6,044 136 6,356 143 6,712 151

National average 3,690 147 3,878 154 3,741 149 3,613 144

Source: Central Statistical Office (GUS)

Construction OutputConstruction OutputConstruction OutputConstruction Output

Month Jan '13 Feb '13 Mar '13 Apr '13 May '13 Jun '13 Jul '13

m/m (%) -60.3 -0.3 +20.9 +7.9 +16.1 +19.1 +7.8

y/y (%) -26.1 -11.4 -18.5 -23.1 -27.5 -18.3 -5.2

Year 2006 2007 2008 2009 2010 2011 2012

y/y (%) +18.1 +15.5 +12.1 +5.1 +4.6 +11.8 -0.6

Source: The Central Statistical Office of Poland, GUS

Sentiment IndicatorsSentiment IndicatorsSentiment IndicatorsSentiment Indicators

Economic sentiment and consumer confidence indicators

-40

-20

0

20

Oct 10

Jan 11

Apr 11

Jul 11

Oct 11

Jan 12

Apr 12

Jul 12

Oct 12

Jan 13

Apr 13

Jul 13

60

80

100

120 Consumer confidence (left axis)

Economic s entiment (rig ht axis )

The economic sentiment (1990-2010 average = 100) is a composite made up of 5 sectoral confidence indicators, which are arithmetic means of seasonally adjusted balances of answers to a selection of questions closely related to the reference variable. Source: Eurostat

Producer PriceProducer PriceProducer PriceProducer Pricessss

Month Jan '13 Feb '13 Mar '13 Apr '13 May'13 Jun '13 Jul'13

m/m (%) 0.0 +0.3 -0.3 -0.7% +0.1 +0.7 +0.2

y/y (%) -1.2 -0.4 -0.7 -2.1% -2.5 -1.3 -0.8

Year 2006 2007 2008 2009 2010 2011 2012

y/y (%) +2.0 +2.0 +2.2 +3.4 +2.1 +7.6 +3.3

Construction PriceConstruction PriceConstruction PriceConstruction Pricessss

Month Jan '13 Feb '13 Mar '13 Apr '13 May'13 Jun '13 Jul'13

m/m (%) -0.2 -0.2 -0.2 -0.1 -0.2 -0.1 -0.1

y/y (%) -1.4 -1.6 -1.8 -1.9 -2.0 -2.0 -1.9

Year 2006 2007 2008 2009 2010 2011 2012

y/y (%) +3.2 +7.4 +4.8 +0.2 -0.1 +1.0 +0.2

IndustrialIndustrialIndustrialIndustrial OutputOutputOutputOutput

Month Jan '13 Feb '13 Mar '13 Apr '13 May '13 Jun '13 Jul '13

m/m (%) +5.4 +0.3 -0.2 -2.3 -0.7 +2.6 +1.5

y/y (%) +0.3 -2.7 -0.6 +2.7 -1.8 +2.8 +6.3

Year 2006 2007 2008 2009 2010 2011 2012

y/y (%) +11.6 +10.7 +3.6 -3.5 +9.8 +7.7 +1.0


TTTTraderaderaderade

Poland exports and imports according to commodity groups, according to SITC classification

EXPORTS in PLN bn IMPORTS in PLN bn

Jan-Jun

2013 y/y (%)

share (%)

2012 share (%)

Jan-Jun 2013

y/y (%)

share (%)

2012 share (%)

Food and live animals 32,226 +9.7 10.5 61,694 10.3 22,938 +3.1 7.4 44,287 6.9

Beverages and tobacco 4,077 +5.7 1.3 7,967 1.3 1,911 -0.7 0.6 3,989 0.6

Crude materials except fuels 7,842 +5.4 2.6 14,024 2.4 10,539 -8.7 3.4 22,053 3.5

Fuels etc 14,708 +1.4 4.8 29,389 4.9 35,257 -16.4 11.4 85,280 13.4

Animal and vegetable oils 739 +54 0.2 1,342 0.2 1,247 -12.2 0.4 2,887 0.5

Chemical products 28,890 +5.5 9.4 54,295 9.1 45,247 -11.1 14.6 89,140 14.0

Manufactured goods by material 63,359 -1.4 20.6 126,161 21.1 54,120 -7.1 17.5 110,773 17.4

Machinery, transport equip. 115,762 +2.7 37.7 223,646 37.5 102,109 -0.9 33.0 203,718 31.9

Other manufactured articles 38,694 +2.8 12.6 75,925 12.7 26,749 -10.0 8.7 57,646 9.0

Not classified 739 n/a 0.3 2,653 0.5 8,973 n/a 3.0 18,515 2.8

TOTAL 307,036 +2.8 100 597,096 100 309,090 -5.3 100 638,288 100

Poland's ten largest trading partners, ranked according to 2012

EXPORTS in PLNbn IMPORTS in PLN bn

No Country Jan-Jun

2013 share *2012 Share No Country

Jan-Jun 2013

share *2012 Share

1 Germany 76,679 25.0% 150,046 25.1% 1 Germany 65,564 21.2% 134,933 21.1%

2 UK 19,554 6.4% 40,184 6.7% 2 Russia 39,181 12.7% 91,033 14.3%

3 Czech Rep. 18,684 6.1% 37,475 6.3% 3 China 27,937 9.3% 57,235 9.0%

4 France 17,858 5.8% 34,862 5.8% 4 Italy 15,804 5.1% 32,782 5.1%

5 Russia 16,328 5.3% 32,290 5.4% 5 France 12,035 3.9% 25,303 4.0%

6 Italy 13,878 4.5% 29,067 4.9% 6 Netherlands 11,885 3.8% 24,543 3.8%

7 Netherlands 11,940 3.9% 26,678 4.5% 7 Czech Rep. 11,479 3.7% 23,327 3.7%

8 Ukraine 8,321 2.7% 17,213 2.9% 8 USA 8,785 2.8% 16,436 2.6%

9 Sweden 8,446 2.8% 15,811 2.6% 9 UK 7,851 2.5% 15,509 2.4%

10 Slovakia 7,955 2.6% 15,288 2.6% 10 South Korea n/a n/a 14,619 2.3%

Source: Central Statistical Office (GUS) *) preliminary estimates, full year

CurrencyCurrencyCurrencyCurrency

Central Bank average rates

as of 30 August 2013

100 USD 322.09 ↓

100 EUR 426.54 ↓

100 GBP 498.99 ↓

100 CHF 346.32 ↓

100 DKK 57.18 ↓

100 SEK 48.79 ↓

100 NOK 52.68 ↓

10,000 JPY 328.39 ↓

100 CZK 16.56 ↓

10,000 HUF 142.02 ↓

100 USD/EUR against PLN

300

350

400

450

500

17 Sep 12

23 N

ov 12

4 Feb 13

12 A

pr 13

24 Jun 13

30 A

ug 13

USD EUR

MMMMoney Supplyoney Supplyoney Supplyoney Supply

in PLN m Apr '13 May '13 Jun '13 Jul '13

Monetary base 150,295 150,475 144,260 155,767

M1 493,721 508,299 523,783 530,666

- Currency outside banks 107,468 109,312 112,815 112,565

M2 914,732 920,112 927,345 921,662

- Time deposits 433,840 425,740 418,252 405,900

M3 935,231 941,791 946,586 945,077

- Net foreign assets 161,880 176,278 160,267 159,749 Monetary base: Polish currency emitted by the central bank and money on accounts held with it. M1= currency outside banks + demand deposits M2= M1+ time deposits (inc in foreign currencies) M3= the broad measure of money supply Source: NBP

CCCCreditreditreditredit

The financial sector's net lending in PLN bn,

loan stock at the end of period

Type of loan Apr '13 May '13 Jun'13 Jul '13

Loans to customers 880,213 887,960 900,999 896,635

- to private companies 257,956 259,593 263,453 261,000

- to households 542,130 549,117 553,055 552,503

Total assets of banks 1,588,750 1,622,666 1,634,587 1,616,221

Source: Central Bank NBP

IIIInterest ratesnterest ratesnterest ratesnterest rates

Average weighted annual interest rates

on loans to non-financial corporations

Term / currency Jan '13 Feb '13 Mar '13 Apr '13 May '13 Jun '13

PLN (up to 1 year) 6.1% 5.9% 5.6% 5.4% 5.3% 5.0%

PLN (up to 5 y ) 6.7% 6.4% 6.2% 5.9% 5.7% 5.4%

PLN (over 5 y) 6.4% 6.3% 6.0% 5.7% 5.6% 5.3%

PLN (total) 6.4% 6.3% 6.0% 5.8% 5.6% 5.3%

EUR (up to 1m EUR) 2.2% 2.1% 2.3% 2.1% 2.3% 1.9%

EUR (over 1m EUR) 2.2% 2.8% 3.6% 2.9% 3.2% 2.9%

Warsaw Inter Bank Offered Rate (WIBOR) as of 30 August 2013

Overnight 1 week 1 month 3 months 6 months

2.60%% 2.60% 2.61% 2.70% 2.73%

Central Bank (NBP) Base Rates

Reference Lombard NBP deposit Rediscount

2.50% 4.00% 1.00% 2.75%

Stock ExchangeStock ExchangeStock ExchangeStock Exchange

Warsaw Stock Exchange, rates in PLN

WIG-20 stocks in alphabetical

order

Price 30 Aug

'13

Change 23 Aug

'13

Change end of

'12

↑ Asseco Pol. 45.77 +3% 1%

↑ Bogdanka 113.55 +2% -17%

↓ BRE 442 -4% 36%

↓ BZ WBK 311.9 -8% 29%

↓ Eurocash 51.9 -8% 19%

↓ GTC 7.7 -1% -22%

↓ Handlowy 102.3 -12% 4%

↓ JSW 67.93 -6% -26%

↓ Kernel 47.4 -1% -29%

↓ KGHM 122.6 -5% -35%

↑ Lotos 38.09 +3% -8%

→ Pekao 174 0% 4%

↑ PGE 16.99 +9% -7%

↑ PGNiG 6.18 +1% 19%

↓ PKN Orlen 44.99 -3% -9%

↓ PKO BP 38.31 -1% 4%

→ PZU 437.95 0% 0%

↓ Synthos 4.43 -3% -18%

↓ Tauron 4.28 -3% -10%

↑TP SA 7.65 +1% -37%

Source: Warsaw Stock Exchange

Key indices

as of 30 August 2013

WIG Total index

44448888,,,,871871871871....99998888 Change 1 week -2% ↓

Change end of '12 +3% ↑

WIG-20 blue chip index

2,2,2,2,384384384384....22222222 Change 1 week -1% ↓

Change end of '12 -8% ↓

WIG Total closing index

last three months

42000

44000

46000

48000

50000

52000

31 May 13

24 Jun 13

16 Jul 13

7 A

ug 13

30 A

ug 13


Poland Today Sp. z o. o.

ul. Złota 61 lok. 100,

00–819 Warsaw, Poland

tel/fax: +48 22 464 82 69

mobile: +48 694 922 898,

+48 602 214 603

www.poland-today.pl

Business Review+ Editor

Lech Kaczanowski

Tel: +48 22 412 41 69

Mobile: +48 607 079 547

[email protected]

Publisher Richard Stephens

Financial Director Arkadiusz Jamski

Creative Director Bartosz Stefaniak

New Business Consultant

Tomasz Andryszczyk

RRRRegional Dataegional Dataegional Dataegional Data

Poland's regions

(main cities indicated

in brackets)

Industrial output

Jan-Jul 2013 *

Monthly wages (PLN)

Jan-Jul 2013 **

Unemploy-ment

Jul 2013

New dwellings Jan-Jul 2013

Indus-

try

Constru-

ction

Indus-

try

Constru-

ction

in '000 % Num-

ber

Index *

Dolnośląskie (Wrocław) 98.7 84.1 4,177 3,910 151.1 13.0 9,219 117.5

Kujawsko-Pomorskie (Bydgoszcz) 101.0 94.6 3,313 3,207 143.8 17.4 3,683 112.4

Lubelskie (Lublin) 98.7 98.2 3,626 2,974 128.4 13.8 3,284 83.6

Lubuskie (Zielona Góra) 95.1 83.1 3,336 2,940 57.9 15.1 1,830 97.0

Łódzkie (Łódź) 103.9 88.2 3,588 2,980 150.7 13.9 3,724 98.4

Małopolskie (Kraków) 97.4 93.6 3,738 3,265 159.6 11.4 9,087 114.0

Mazowieckie (Warszawa) 106.9 74.5 4,494 4,741 281.8 11.1 16,014 97.5

Opolskie (Opole) 96.4 93.4 3,464 3,112 49.6 13.6 916 106.0

Podkarpackie (Rzeszów) 107.8 98.2 3,228 3,012 146.2 15.5 3,379 95.1

Podlaskie (Białystok) 106.1 89.1 3,171 3,690 68.1 14.5 1,954 88.0

Pomorskie (Gdańsk-Gdynia) 101.0 88.7 3,871 3,444 110.9 13.0 6,665 101.1

Śląskie (Katowice) 96.0 86.3 4,501 3,471 206.2 11.1 6,235 122.5

Świętokrzyskie (Kielce) 97.9 84.9 3,313 3,140 85.0 15.5 1,397 86.8

Warmińsko-Mazurskie (Olsztyn) 97.0 86.7 3,163 3,037 107.3 20.2 2,397 97.0

Wielkopolskie (Poznań) 101.5 85.8 3,633 3,580 143.5 9.6 7,960 101.4

Zachodniopomorskie (Szczecin) 110.7 90.7 3,389 3,222 103.1 16.8 3,337 76.6

National average 100.5 84.0 3,882 3,641 2,093.1 13.1 81,081 101.7

Index 100 = same period of the previous year. ** without social taxes

Sources: Central Statistical Office GUS, NBP, C&W

Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)

Quarter Q4 '11 Q1'12 Q2 '12 Q3 '12 Q4 '12 Q1 '13

in Poland 2,917 -1,808 1,131 1,084 2,048 360

Polish DI -929 1,090 883 -401 -1,197 329

Year 2007 2008 2009 2010 2011 2012

in Poland 17,242 10,128 9,343 10,507 13,646 2,455

Polish DI -4,020 -3,072 -3,335 5,484 -5,276 375

Current Account (EUR m)Current Account (EUR m)Current Account (EUR m)Current Account (EUR m)

Period 2010 2011 2012 Q3 '12 Q4 '12 Q1 '13

Trade balance -8,893 -10,059 -5,313 -445 -1,113 -139

Services, net 2,334 4,048 4,816 1,122 1,073 1,239

CA balance -18,129 -17,977 -13,332 -3,285 -3,329 -2,055

CA balance vs GDP -5.1% -4.9% -3.5% -4.1% -3.5% -3.0%

Source: NBP, BZ WBK

UUUUnemploymentnemploymentnemploymentnemployment

Registered unemployed, in ‘000 and

% of population in working age

1800

2000

2200

2400

2600

Q2 10

Q4 10

Q2 11

Q4 11

Q2 12

Q4 12

Q2 13

6

9

12

15 number (left axis) % (right axis)

Source: Central Statistical Office GUS

IndustrIndustrIndustrIndustrialialialial PropertiesPropertiesPropertiesProperties

by region, 2H 2012

Existing stock, sq.m

Under const ruction, sq.m

Va-cancy ratio

Effective rents EUR/ sq.m/mth

Warsaw central 2,710,000 44,000 15.2%

3.9–5.0

Warsaw suburbs 1.9–3.2

Central Poland 1,000,000 15,000 12.2% 1.9–3.1

Poznań 1,027,000 30,000 5.0% 2.3–2.9

Upper Silesia 1,470,000 22,000 4.2% 2.6–3.1

Wrocław 730,000 56,000 7.6% 2.4–3.0

Gdańsk 178,000 14,000 16.0% 3.2–4.0

Kraków 143,000 n/a 8.7% 4.0-4.1

CommercialCommercialCommercialCommercial PropertiesPropertiesPropertiesProperties

City

New apartments* Offices 2H'12 Retail rents** '12

Q1 '13

PLN/sq.m

Change

y/y

Rents** Vacancy Retail

centres

High

streets

Warsaw 8,076 -5.9% 12-26.5 9.0% 85 83

Kraków 6,305 -12.1% 13-15 3.95% 41 78

Katowice 5,526 -5.0% 13-14 6.85% 48 56

Poznań 6,412 -13.3% 14-16 14.35% 44 55

Łódź 4,898 -9.2% 12-14 11.99% 31 26

Wrocław 6,031 -13.5% 13-16 8.01% 38 41

Tricity 6,453 -8.1% 13-15 9.44% 39 31

*avg, offer-based ** EUR/sq.m/month; Retail units 100-150 sq.m

Country Credit RatingsCountry Credit RatingsCountry Credit RatingsCountry Credit Ratings

Agency rating outlook

Fitch Ratings A- stable

Standard & Poor's A- stable

Moody's A2 stable

Source: Rating agencies

Real EarningsReal EarningsReal EarningsReal Earnings

Average gross wage vs inflation.

100

120

140

160

180

Jul09

Mar10

Nov10

Jul11

Mar12

Nov12

Jul13

Wage CPI

Index 100 = Jan 2005. Source: GUS

Documents

Poland Today Business Review+ No. 001