Poland Today Business Review+ No. 62

No. 062 / 24th November 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

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MANUFACTURING & PROCESSING

Volvo to close down Wrocław construction equipment plant page 2

BANKING & FINANCE

Atlantic Fund Services acquires fund distributor Moventum page 2

SERVICES & BPO

Germany's ista to open 3rd Polish shared services unit in Opole page 3

TRANSPORT & LOGISTICS

DCT Gdańsk secures EUR 290m financing for new investment page 5

PROPERTY & CONSTRUC-TION

Echo signs Deloitte as key tenant for Warsaw high rise project Q22 page 5 Office vacancy rate on the rise in Warsaw as Kraków experi-ences a mini building boom page 6

HOSPITALITY

Orbis accepts Accor's offer and buys 46 CEE hotels for EUR 142m page 7

FOOD

Nestlé's pet food plant to em-ploy 230 staff from next year page 8

RETAIL

FMCG giant Eurocash merges its tobacco distribution sub-sidiary with Kolporter page 9

RETAIL PROPERTIES

Rosehill acquires large Warsaw retail project with Griffin's money page 10

POLITICS & ECONOMY

Industrial output sees weak growth in October page 9

OPINION

France and Poland: friendly relations, opposing economic philosophies page 13

KEY FIGURES

Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 14-16

The Koreans are buying a 70% stake inthe Białystok-based Adampol. Photo: Adampol

Hyundai Glovis acquires AdampolHyundai Glovis acquires AdampolHyundai Glovis acquires AdampolHyundai Glovis acquires Adampol Korea's Hyundai Glovis has acquired a majority stake in Polish Adampol, one of Europe's leading finished vehicle logistics companies. The value of the business, as estimated by the buyer, is about EUR 70m, making the Adampol deal the largest-ever takeover made by a Korean logistics firm. page 4

PiSPiSPiSPiS demandsdemandsdemandsdemands rererere----run of local electionsrun of local electionsrun of local electionsrun of local elections Following a series embarrassing technical problems that pre-vented the ballot from being tallied on time, Poland's electoral authority PKW announced that the ruling centre right party PO had won the most seats in regional assemblies. The main opposi-tion party PiS, which seemed like a clear winner based on exit polls, says the vote was rigged and demands a re-run. page 12

Poland Today is delighted to announce that we will be exclusively hosting the ‘Primetime Poland’ lunch & afternoon conference during ‘New Europe’ day on Wednesday 11 March at the world’s most prestigious real estate event. This is an extraordinary achievement for a magazine which has only just celebrated its 2nd anniversary on the market, ranking alongside its other successes, including:

• Exclusive interviews with President Bronisław Komorowski and former deputy Prime Minister Elżbieta Bieńkowska

• Bringing 50 journalists from around the world to Warsaw in May so they could hear about Poland’s economic transformation for themselves

• Establishing Primetime Warsaw as the pre-eminent conference about the future development of the nation’s capital city

Poland Today will also be an official media patron at MIPIM 2015.

Poland Today leading the debate at MIPIM 2015

To find out more please contact Magdalena Gawlikowska at [email protected], or on (+48) 602 223 634

weekly newsletter # 062 / 24th November 2014 / page 2

MANUFACTURING & PROCESSING

Volvo to close down Volvo to close down Volvo to close down Volvo to close down Wrocław Wrocław Wrocław Wrocław construction construction construction construction equipmentequipmentequipmentequipment factoryfactoryfactoryfactory

Volvo Construction Equipment (Volvo CE) has announced plans to close down its backhoe loader fac-tory in Wrocław, as the company relocates production to China. The exact time line of the closure, which will lead to an estimated 200 redundancies, has not yet been confirmed. As part of the Volvo Group’s ongoing activities to im-prove profitability and reduce costs Volvo CE decided to discontinue product development and production of backhoe loaders and motor graders in Europe and Americas and transfer these operations to its Chinese subsidiary SDLG. Combined with other efficiency en-hancement measures, this will result in a workforce reduction of about 1,000 employees, of whom the ma-jority are in Poland, the US and Brazil, Volvo said. Volvo Group is hoping the measures will reduce its structural costs by SEK 3.5bn. "The phase out is expected to take place in 2015 but no further details are available as of yet," Volvo's Polish spokesperson Anna Nojszewska tells Poland Today. According to Volvo, its current product lines of tech-nologically advanced and high-spec Volvo-branded backhoe loaders and motor graders have addressed a relatively small premium segment of the market. SDLG-branded backhoe loaders and motor graders will better serve customer demands in the large and growing value segment of the market.

Volvo says demand for its premium segment back-hoe loaders, like the ones made in Wrocław, has been limited. Photo: Volvo CE

The Volvo Group has approximately 3,000 staff in Po-land at the moment, a half of whom are employed at its bus factory in Wrocław. After taking on production from the Swedish plant in Saffle, Wrocław is Volvo's largest bus production unit in Europe. It has turned out more than 10,000 buses to-date, and in 2014, for the first time ever, its full-year production is to come in excess of 1,000 units. Asked whether the expanding bus plant could potentially provide employment op-portunities for redundant workers from the construc-tion equipment unit, Ms. Nojszewska replies: "Of course we are analyzing all scenarios that would enable us to keep as many employees as possible."

BANKING & FINANCE

Atlantic Fund Services Atlantic Fund Services Atlantic Fund Services Atlantic Fund Services acquires fund acquires fund acquires fund acquires fund distributor Moventumdistributor Moventumdistributor Moventumdistributor Moventum

The Warsaw-based European unit of Atlantic Fund Services, a US-owned independent provider of fund

services, has completed the acquisition of Moventum S.C.A, a Luxembourg-based distribution platform for independent fund advisors and funds. "This acquisition will provide a powerful blend of Moventum’s experience in product distribution and independent financial advisors’ (IFA) support, togeth-er with Atlantic’s state-of-the-art technology solu-tions," comments Roman Lewszyk, the Chairman and CEO of Atlantic’s European business. Atlantic acquired Moventum from Global Portfolio Advisors and Banque de Luxembourg. The transaction has been approved by the Luxembourg Regulator.

Polish mutual funds (TFI) in 2014 Assets under management in PLNbn

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215

Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Source: IZFiA

"Until now we have been a rather modest distributor. The acquisition of Moventum will let us seriously step into the market of global distribution of funds," high-lights Roman Lewszyk. Atlantic Fund Services is a global third party fund ad-ministrator with USD 18bn in assets under administra-tion and operations in Luxembourg, the UK, Poland


and the US. The European unit, operating from War-saw with a staff of 180, provides fund administration, fund accounting, transfer agency, distribution and compliance solutions to clients in Poland, Austria, the Czech Republic, and Liechtenstein. Atlantic supports registered and unregistered investment advisors, and advisors to pension funds, mutual funds, hedge funds, UCITS, SIFs, common and collective funds, ETFs and other pooled investment products. Atlantic's US oper-ation has been providing administration services since 1986. "Atlantic has been operating in Poland since 1995 and we are one of the top players in this market, currently servicing 1.6m customer accounts. We believe that the Moventum deal will enable us to open the door to global markets for Polish mutual funds," Roman Lewszyk tells Poland Today. "We have been active in Luxembourg since 2011 and we know how to assist Polish funds in placing their products in that market. Many institutional investors worldwide earmark certain portions of their portfolios for CEE assets and it's up to Polish funds to create products that would appeal to them. I think the best option format in this case would be Luxembourg-based UCITS, which Atlantic can help set up and pro-mote, and Moventum - deliver to global investors. We think this mix of capabilities is unique on the Polish market," he adds. Moventum, which distributes funds in 120 markets globally, currently has EUR 3.5bn of euro assets under administration. The company supports 1,850 financial advisors, insurance companies, fund of funds and banks located in 19 jurisdictions. Moventum has dis-tribution agreements with 450 fund companies for over 9,000 funds.

SERVICES & BPO

Germany's ista to open Germany's ista to open Germany's ista to open Germany's ista to open 3rd Polish shared 3rd Polish shared 3rd Polish shared 3rd Polish shared services unit in Opoleservices unit in Opoleservices unit in Opoleservices unit in Opole

Germany's ista International, one of the global lead-ers in the sub-metering, billing, visualization and man-agement of energy, water and other ancillary costs, is setting up its third Polish outsourcing unit in the southwestern city of Opole. ista Shared Services Polska, one of ista's two Polish subsidiaries, is hoping to recruit 200 staff in Opole by the end of 2016. "We have two locations in Poland at the moment, one in Katowice, with 200 employees, and another in Gli-wice, where we have 670 staff. Theoretically we could expand in both cities, but we have instead chosen Opole, which offers better availability of German speaking employees. Moreover, our intention is to grow very dynamically, starting with 50 employees al-ready in January 2015, which is proving much easier in Opole, where after two weeks of hiring we have al-ready recruited roughly a third of that number. Last but not least, expanding in Katowice without relocat-ing to new offices would be impossible, and in Gliwice - very difficult," Jacek Styczeń, CEO of ista Shared Services Polska, tells Poland Today. Asked whether Opole -a relatively new destination for business services firms -offers sufficient infrastruc-ture, Mr. Styczeń replies: "Generally, the conditions leave a lot to be desired. However, although there is no typical BPO/SSC-compliant office space available in Opole at the mo-ment, our situation is pretty comfortable in this re-spect. In the first year we will be located in the CWT

building downtown, which enables us to grow up to 100 workstations, and starting from January 2016 we are relocating to a new building, designed to meet the needs of business services firms, and capable of ac-commodating up to 500 employees, giving us and oth-er investors ample room for growth. The project in question, owned by CGI, is currently under construc-tion in the vicinity of the Karolinka shopping center." As a typical shared services centre, ista SSC's Polish units provide mainly support, bookkeeping and IT services to other companies from the ista group, main-ly from Germany, but also from Poland, Belgium, Denmark, Austria, Switzerland and the UK. "We are seeking candidates with good German and analytical skills, diligent team players with attention to detail. As far as education is concerned we are inter-ested in high school and university graduates as well as students." Europe's 3rd largest market ista's history goes back 100 years to the foundation of Clorius and ista, the Danish and German pioneers of consumption-based billing of energy and water. Since the fall of the Berlin Wall in 1989 ista has expanded not only in Germany but also internationally. Today ista is represented in 25 countries with approximately 4,700 employees worldwide. Last year ista turned over EUR 744m and monitored meters in 12m homes. The company supplies property managers, owners and energy utilities with metering and recording devices and also installs them. With these devices, it records the individual consumption of water, heating, cooling, gas, power and ancillary costs as well as analyses ener-gy data. ista Polska, the Polish unit, serves 6,500 cli-ents, monitoring meters in 1.2m homes. It employs 117 staff in 10 locations with annual revenues of approxi-mately EUR 20m.


"Based on the number of housing units, Poland could be Europe's third largest market after Germany and France. However, only a half of the estimated 6.5m apartments that can be equipped with individual heat meters use such devices, while the remaining 50% is being billed based on floor space, and has no way of monitoring actual usage and paying for it," ista Polska's CEO Tomasz Bazga tells Poland Today. According to studies, by introducing central heating bills based on individual consumption in the estimated 3.2m Polish homes that are being currently charged per sq.m, Poland could save approximately 8.9 TWh per annum and reduce its CO2 emissions by 2m tons, an amount comparable to that generated by the coun-try's chemical industry. "We are offering almost exclusively remote metering devices, which enable real-time monitoring of energy consumption, allowing homeowners to control costs and become more conscious users. In order for this to become a norm, Poland has to implement provisions of the EU Energy Efficiency Directive, which calls for all residential units in member states to be equipped with individual devices that measure actual energy usage," Mr. Bazga says.


Hyundai Glovis buys Hyundai Glovis buys Hyundai Glovis buys Hyundai Glovis buys Poland's top finished Poland's top finished Poland's top finished Poland's top finished car logistics companycar logistics companycar logistics companycar logistics company

Korean automotive logistics firm Hyundai Glovis has inked an agreement to acquire a 70% stake in Adampol, a Polish company that specializes in over the road shipping of cars. The value of the business, as estimated by Hyundai Glovi,s is about EUR 70m mak-

ing the Adampol deal the largest-ever takeover made by a Korean logistics firm. The sellers included Bel-gium's EMPE (which sold its entire 41% stake in the Polish firm), as well as Adampol's CEO Elena Łukanowa and deputy CEO Adam Byglewski, who maintain a 30% ownership in the business following the transaction.

Hyundai Glovis president Kim Kyung-bae met Adampol's founder and vice chairman Adam Byglewski and major shareholders on November 18 at the signing ceremony in Białystok. Photo: Hyundai Glovis

Established on November 9, 1989, the very day the Berlin Wall came down, Adampol has since grown to become Europe's 10th largest forwarder of finished cars by revenue. The company has recorded an aver-age annual growth rate of 15% for three years since 2011. Last year, it transported about 400,000 cars for BMW, GM, Toyota, and Volkswagen, with sales reve-nues of more than EUR 100m and a 10-percent operat-ing profit ratio. In Q1-Q3 2014 its net earnings topped EUR 1.5m. With a head office in Bialystok, it has a number of branch offices across Europe, including in the UK, Belgium, Russia, and Italy. Adampol employs 640 staff and has a proprietary fleet of 386 car haulers. An estimated 600 additional trucks are at its disposal via partners and subcontractors.

With the acquisition of Adampol, Hyundai Glovis will actively pursue business opportunities in Europe, the company said. Currently the Korean firm has ten logis-tics hubs across Europe and Russia including Germa-ny, Slovakia, the Czech Republic, and Russia. Head-quartered in Seoul, Korea, Hyundai Glovis is part of the Hyundai Kia Automotive Group. Its predeces-sor company, Hankook Logitech Co. Ltd was formed in February 2001. It changed its name to Hyundai Glovis in June 2003. Hyundai Glovis provides ocean transportation, air transportation, inland transportation, logistics con-sulting, storage, packaging services as well as supply chain management services.

Although its core competence is finished vehicles lo-gistics and forwarding, Hyundai Glovis provides also parts supply logistics and container services. Photo: Hyundai Glovis

Hyundai has been Adampol's client for the past six weeks, generating approximately a fifth of the Polish company's revenue.Asked whether tying the knot with the Korean automotive giant is not going to hurt Adampol's relations with other carmarkers, Mr. Byglewski told Poland Today: "This cooperation is the next step in Adampol's devel-opment, one that opens up new business opportuni-ties, and it in no way affects the company's relation-ship with its current clients."



DCT Gdańsk secures DCT Gdańsk secures DCT Gdańsk secures DCT Gdańsk secures EUR 290m financing EUR 290m financing EUR 290m financing EUR 290m financing for new investmentfor new investmentfor new investmentfor new investment

Poland's leading container terminal, the Australian-owned DCT Gdańsk, has secured EUR 290m financ-ing from a consortium of banks for a key expansion project that will boost the facility's annual handling capacity beyond 3m TEU. The agreement is a major step towards the launch of construction works. A few weeks ago DCT named Belgium's Besix BV as the general contractor for the project. "The initial capacity of the new berth will be 1.5m TEU annually, which means it will match that of our exist-ing terminal, bringing the total handling capacity of DCT Gdańsk up to 3m TEU. We intend to subsequent-ly expand the facility by a further 1m TEU, but the tim-ing of phase two will depend on market situation," Ad-am Żołnowski, Chief Financial Officer at DCT told Po-land Today. The brand new, 656m-long berth will be ready to op-erate in 2016. It will be equipped with 5 STS cranes, delivered by Liebherr Container Cranes Ltd., 15 RTG cranes and additional yard equipment. Unlike the ex-isting T1 terminal, which is an artificial box pier pro-truding into the sea, T2 will be positioned along the waterfront, reducing costs and offering better access to larger ships, even the kinds that are still on drawing boards. The draught will be up to 17m, along the quay. "We are directly employing 530 staff at the moment and we are expecting this number to double gradually following the launch of T2. This does not include jobs to be created by our partners in logistics, construction.

In general direct and indirect effect, combined with induced effect could reach 8-10 thousand jobs," Żołnowski said.

DCT Gdańsk: the existing T1 terminal (right) and the planned new T2 terminal (left). Image: DCT Gdańsk

DCT Gdańsk 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 Gdańsk. In 2013 DCT Gdańsk handled more than 1m TEU, up from nearly 0.9m in 2012. It is a key Baltic stop on Maersk's deep-sea container service from, serviced by the Danish company's first E-class type vessel Emma Maersk.

PROPERTY & CONSTRUCTION

EEEEcho signs Deloitte as cho signs Deloitte as cho signs Deloitte as cho signs Deloitte as key tenant for Warsaw key tenant for Warsaw key tenant for Warsaw key tenant for Warsaw high rise project Q22high rise project Q22high rise project Q22high rise project Q22

Seven years after it moved into Skanska's Atrium City building in Warsaw, which was then renamed Deloitte House, the consultancy Deloitte is gearing up to relo-cate its Warsaw offices across the street, to the Q22 skyscraper that is currently being developed by Polish Echo Investment. Deloitte, of the world's top pro-viders of audit, consulting, financial advisory, risk management, and tax services, will move into its new premises in Q2 2016, taking up 11,000 sq.m of custom-ized office at Q22. Designed by one of Poland's most renowned architec-tural studios, Kuryłowicz & Associates, Q22 is a 155-m-tall office building offering 50,000 sq,m of office space and 348 parking spaces in a 5-level underground gar-age. The project will be located at the site of the for-mer Mercure hotel, at the intersection of Aleja Jana Pawła II and Grzybowska Streets. The general con-tractor of this PLN 500m development is Polish com-pany Modzelewski & Rodek. Last week Echo In-vestment said it had acquired a EUR 112m loan for the project from BZ WBK and PKO BP banks. Echo Investment has recently secured a BREEAM In-terim Excellent certificate of energy efficiency and en-vironmental performance for the project. Wojciech Gepner, public relations manager at Echo Investment, has recently told Poland Today the company is now in advanced talks with several potential large tenants. Q22 is one of two skyscrapers currently under con-struction in Warsaw, the other one being Ghelamco's


Warsaw Spire. A number of other high rises are at a planning stage. Echo Investment, which to-date has delivered more than 430,000 sq.m GLA in retail centers, 250,000sq.m in office buildings, 245,000 sq.m of usable housing space, and 89,000 sq.m in hotels, has another major of-fice project under construction in Warsaw, the 34,000 sq.m Park Rozwoju in the Mokotów district. Outside of Warsaw, Echo is building offices in Kraków, Kato-wice, and Wrocław.

Q22 will make a welcome addition to the Warsaw skyline in 2016. Floors from 2 to 14 and 18 to 39 will offer office space while floors 14-17 will be designed for special functions, for example a conference center, fit-ness club and a restau-rant. Image: JLL

Earlier this year Echo has acquired a 4.5ha former site of Browary Warszawskie brewery (an entire block en-closed by the Grzybowska, Krochmalna and Wronia streets, across the street from Warsaw's Hilton Hotel and the Platinum Towers complex) for EUR 42m. The Polish developer intends to build mainly offices in this

location, with some residential buildings – overall ap-proximately 100,000 sq.m of floor space. According to the company, the capital expenditures will come in excess of PLN 1bn and the project will take some 5-7 years to complete. The recently approved zoning per-mit allows for the construction of three 120-140m tall towers at the site and obligates investors to preserve the historic brewery cellars located there. The developer saw its consolidated net income come to PLN 331m last year, down from PLN 373m in 2012, whereas the respective revenue totals came to PLN 528m and PLN 584m. Rumors have it that Echo's founder, billionaire Michał Sołowow is seeking buyers for his 45% stake in the company, which may be worth between PLN 1.2bn and PLN 1.5bn.

PROPERTY & CONSTRUCTION

Office vacancy rate on Office vacancy rate on Office vacancy rate on Office vacancy rate on the rise in Warsawthe rise in Warsawthe rise in Warsawthe rise in Warsaw as as as as Kraków experiencKraków experiencKraków experiencKraków experiences a es a es a es a miniminiminimini building building building building boomboomboomboom

Poland's modern office stock expanded by 130,000 sq.m in Q3 2014, amid robust supply and demand across the country's key office hubs, reports JLL in the latest edition of their quarterly market overview. In Q3, tenant demand in Warsaw stood at approxi-mately 163,000 sq.m, raising the total for 2014 to 422,000 sq.m. Net take up (excluding renewals) amounted to almost 115,000 sq.m of leased space. The most notable transactions were signed by Raiffeisen (pre-let for 19,500 sq.m) in Prime Corporate Center; Media Saturn Holding (renewal for 8,000 sq.m) in Blue City Offices and Moneygram (new deal for 7,300

sq.m) in Konstruktorska Business Center. There were also a number of transactions involving public tenants, for instance the road transport authority GITD (new deal for 7,100 sq.m) in Equator I, and aviation ULC (renewal for 6,600 sq.m) in Flanders Business Park A. The vacancy rate in Warsaw has increased to 13.8%, indicating an ongoing upward trend. Cooling demand combined with increasing supply will soon trigger a sharper increase, JLL said. Currently, the prime head-line rents in Warsaw city centre range between EUR 22 and EUR 24 / sq.m / month, whereas offices in the best non-central locations are available at EUR 14.50 - EUR 14.75 / sq.m / month.

Warsaw office vacancy rate to go up Office completions, future supply, vacancy rate in Warsaw

Source: JLL, WRF, Q3 2014, F-forecast

"It was a very good quarter for the office markets out-side Warsaw, with approximately 117,000 sq.m of modern office space leased in Q3, and a total of 320,000 sq.m for the year so far. It is worth noting that this high demand was generated by companies from the business services sector, with examples of HP GBC and Infosys signing very large lease agree-ments in Wrocław and Łódź. Total demand in regional markets overall for the first three quarters of 2014 ac-counts for 88% of last year's demand," said Anna


Bartoszewicz-Wnuk, Head of Research and Consul-tancy at JLL. The biggest transactions in regional cities in Q3 in-cluded the 21,000 sq.m renewal and expansion by In-fosys in Green Horizon in Łódź, a 16,400 sq.m pre-let in Dominikański in Wrocław by HP GBC and the re-newal of almost 4,400 sq.m in Diamante Plaza in Kraków by AON Hewitt. As a result, Łódź has already exceeded last year’s total take up by 95%. Kraków shows stable and strong take-up volumes, which are already greater than in the whole of 2013.

Mixed picture in regional cities Stock (sq.m) and Vacancy Rate (%) outside Warsaw

Source: JLL, Q3 2014

As of end of Q3, Warsaw's modern office stock amounted to 4.365m sq.m, with a further 640,000 sq.m under construction and to be delivered in equal parts in 2015 and 2016. The final three months of 2014 are to see a further 90,000 sq.m of new space added to the capital city's modern office stock. In Warsaw, Q3 saw the completion of four office buildings: Warsaw Spire B (20,000 sq.m), Nimbus (19,000 sq.m), Małachowskiego Square (12,000 sq.m), and Garden Plaza (8,500 sq.m). "An increasingly important trend is the refurbishment of older office properties to enhance their position in

an increasingly competitive Warsaw market. At the moment, almost 60,000 sq m of office space is under refurbishment," said Anna Młyniec, Head of Office Agency and Tenant Representation, JLL. Outside Warsaw, the past quarter was particularly busy for developers in Kraków, where three new buildings: Kapelanka A (17,300 sq.m), Enterprise Park C (13,600 sq.m) and Quattro Business Park D (12,200 sq.m), were completed. "Developer activity is high in regional cities: currently more than 520,000 sq.m of office space is under active construction. Interestingly, a large proportion of this volume consists of large office buildings with an area of over 20,000 sq.m. Together Wrocław, Kraków and the Tri-City account for 64% of all projects”, Anna Bartoszewicz-Wnuk commented. Prime headline rents in regional cities currently range between EUR 11 to EUR12 / sq.m / month in Lublin and EUR 14 to EUR 15 / sq.m / month in Wrocław and Poznań. The lowest vacancy rate (6%) has been regis-tered in Krakow, whereas the highest (17.7%) was not-ed in Szczecin. "There is no common picture for all the major cities outside of Warsaw in terms of both rents and vacancy. One large lease agreement can still change the balance on the market. Due to such a change Łódź saw one of the lowest vacancy rates in the history of the city," An-na Bartoszewicz-Wnuk summarized.

HOSPITALITY

Orbis accepts Accor's Orbis accepts Accor's Orbis accepts Accor's Orbis accepts Accor's offer and buys 46 CEE offer and buys 46 CEE offer and buys 46 CEE offer and buys 46 CEE hotels for EUR 142m hotels for EUR 142m hotels for EUR 142m hotels for EUR 142m

It has come as no surprise that Poland's top hospitality group Orbis had accepted the offer of its strategic partner Accor (see BR+ No. 059 page 8) to acquire the latter's 46 hotels in Central Europe for EUR 142.3m (PLN 600m). Orbis is to sign a new Master License Agreement with the French group, which will give the Warsaw-listed operator the right to operate until 2035 the hotel busi-ness under the Accor brands in 16 countries: Bulgaria, Czech Republic, Estonia, Lithuania, Latvia, Poland, Macedonia, Romania, Slovakia, Hungary, Croatia, Slo-venia, Bosnia and Herzegovina, Montenegro, Serbia and Moldova. As part of the deal, Orbis takes over Ac-cor's current portfolio of 46 hotels in these countries, including 11 owned, 17 leased, 11 managed, and 7 fran-chised. All hotels operate under the Accor brands: So-fitel, Pullman, MGallery, Novotel, Mercure, ibis and ibis budget. 76% of these hotels are located in capital cities. 38 of them are operational, and 8 projects are in the pipeline, of which 3 hotels to be managed and 5 to be franchised. "The transaction perfectly matches our strategy as we have been aiming at wider development in the region for some time now. After negotiations the license has been extended from 10 to 16 countries and from a 15 to a 20-year period of time. Entering new markets gives us a great opportunity for a more robust supply growth. Accor mandates Orbis to be its management platform for this part of Europe - we see this as a great recognition for our past achievements and as a strate-


gic step forward in our development," said Gilles Clavie, President of the Management Board of Orbis. Orbis had hired an independent advisor HVS to carry out a valuation of the portfolio in question. The EUR 142.3m price tag falls within the range recommended by the advisor, Orbis said.

Orbis Group's key financials

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Revenues in PLNm, left ax is

Net result in PLNm, right axis

Source: Orbis

"We firmly believe that the price is fair. It was con-firmed by the in-depth analysis which we performed together with our advisors. We have a great under-standing of the region and will be able to capitalize on strong brands. Significant business enlargement will also translate into value creation for our shareholders. We are very glad that the Supervisory Board shared the Management Board’s opinion. Orbis has a very good cash position today and in addition is debt free. Therefore the deal is going to be financed from our own funds, as well as from bank loans which we may replace by proceeds from bond issue in the future," said Gilles Clavie. The Warsaw-listed Orbis turned over PLN 682.6m in 2013 (down from PLN 707.4mm in 2012), while its net income came to PLN 65m (vs. 68m in 2012). Average revenue per room dropped 4.6% last year, down to

PLN 124.1, while room occupancy rose by three per-centage points and topped 58.8%. As of June 2014, the company's total assets were worth PLN 2.1bn. Accord-ing to Orbis, the transaction will Accor will be closed in 2015 and therefore it will not impact its 2014 re-sults. Currently, the Orbis Group comprises 68 hotels (in-cluding 52 owned, 1 leased, 3 hotels under manage-ment agreements and 12 franchised) operating in 32 cities and resorts in Poland and Baltic countries. "This transaction we give a significant boost to our business. Total number of our hotels will soon exceed 110, and Orbis will be able to develop business in 16 countries. We will significantly strengthen our leading position as the key hotel operator in Central Europe. We are acquiring a healthy network, mainly located in capital cities. Orbis already has a great team working in international environment and having extensive understanding of this region. I am sure that both Orbis and the entities operating in new markets will benefit from our mutual cooperation and positive synergies will soon be effective," said Ireneusz Węgłowski, Vice President of the Management Board of Orbis.

FOOD

NestléNestléNestléNestlé's pet food plant 's pet food plant 's pet food plant 's pet food plant to employ 230 staff to employ 230 staff to employ 230 staff to employ 230 staff from next yearfrom next yearfrom next yearfrom next year

Work is well advanced on Swiss-based food giant Nestlé's pet food factory and distribution centre in Nowa Wieś near Wrocław, which is to launch opera-tions in 2015, supplying Purina PetCare-branded products to Central and Eastern European markets.

Nestlé acquired a 14.6ha site for the project in Nowa Wieś Wrocławska near Wrocław last year. The facto-ry, an investment of PLN 300m, will be Nestlé's 10th production unit in the country. The project, which is to be developed in six stages and spread over the time span of 10 years, will create 230 jobs in 2015 alone. Re-cruitment is currently underway with Nestlé offering employment opportunities for young graduates as well as experienced candidates. "With its official inauguration planned for March 2015, the factory will initially supply Felix-branded cat food to four markets: Germany, Austria, Czech Republic and Poland," Małgorzata Szlendak, CA&PR manager at Nestlé Polska tells Poland Today. According to the in-vestor, 90% of ingredients used in production will be sourced from Polish suppliers.

Nestlé says it has finished the construction of build-ings and now work is underway on development of auxiliary infrastructure and interior fit-out. Photo: Nestlé

"The investment supports Nestlé Purina's long term ambition to deliver total category value 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 Central and Eastern Europe and was chosen for its significant potential for growth.


The Wrocław area itself was selected for its close proximity to major roads, the availability of skilled la-bor, readiness of the site, as well as favorable invest-ment climate," Giorgio Vesprini, Country Manager Nestlé Purina Poland & Head of CE Region told Po-land Today last year, when the project was first an-nounced. 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. Its Polish portfolio includes 1,500 products and 90 brands. Nestlé in Poland currently employs 5,000 people. In 2013 Nestlé Polska generated sales revenues of PLN 3.4bn, against PLN 3.5bn in 2012 and PLN 2.7bn in 2011. Since its first entered the Polish market two decades ago Nestlé has invested in excess of PLN 1.6bn in the country. The Wrocław pro-ject will bring that total close to PLN 2bn. Last year Nestlé upgraded its foods and condiments plant in Kalisz and launched a new quality manage-ment center in Rzeszów, at a combined cost of PLN 160m. Other recent investments included expansion of the candy bar unit in Kargowa. Nestlé Purina, with its global headquarters in St. Lou-is, USA, produces brands such as Pro Plan, Purina One, Friskies, Darling, Beneful, Felix, Dog Chow and Cat Chow. According to Nielsen, Nestlé Purina brands have slightly less than a 10% share in Poland's pet food market. "We believe that with our investment in this new site and our brands, we will continue to grow our market share. The current level of calorific coverage in Poland [pet food industry products consumed by our pets; ed.] is very low in comparison with other markets and we

have a good opportunity to lead this evolution. In the longer term, the new facilities will enable Nestlé Puri-na to produce an expanded product portfolio," Mr. Vesprini said.

RETAIL

FMCG giant Eurocash FMCG giant Eurocash FMCG giant Eurocash FMCG giant Eurocash merges its tobacco merges its tobacco merges its tobacco merges its tobacco distribution subsidiarydistribution subsidiarydistribution subsidiarydistribution subsidiary with Kolporterwith Kolporterwith Kolporterwith Kolporter

Poland's leading FMCG distributor, the Warsaw-listed Eurocash, has finalized the merger of its subsidiary KDWT, which is Poland's top distributor of tobacco products, with another major player in the sector, the Kielce-based Kolporter. As a result of the transaction, KDWT's annual revenue is to increase by more than PLN 2bn from the nearly PLN 3bn it generated in 2013. The transaction took the form of a share swap, with Kolporter becoming a minority shareholder in KDWT, which was previously 100%-owned by Eurocash. Kolporter acquired 25% plus one share in KDWT in exchange for a contribution in the form of all shares in a newly-formed company, Service FMCG, to which Kolporter transferred its tobacco, impulse product, beverage and other FMCG distribution business. In line with competition watchdog UOKIK's recommen-dations, the parties have excluded certain wholesale locations and other fixed and intangible assets from the scope of the transaction. By sealing the agreement with Kolporter, we are rein-forcing KDWT’s position as leader in the distribution of tobacco and impulse products in Poland. In 2015,

the combined entity’s revenue should substantially ex-ceed PLN 5bn. Thanks to a larger operational scale, we will be able to provide an even more effective and comprehensive service, to the benefit of Eurocash Group’s clients and Kolporter’s existing customers alike” said Jacek Owczarek, management board mem-ber and finance director at Eurocash. "This being a share exchange and, therefore, a non-cash transaction, it did not increase Eurocash Group’s debt. As per the agreement, however, we will be re-sponsible for the financing of Service FMCG’s working capital needs. Funds for this purpose have already been secured in the form of a revolving credit facility issued to KDWT in August this year," Mr. Owczarek added.

Tobacco is a shrinking business Legal cigarette sales in Poland, in bn units

40

45

50

55

60

65

70

2007 2008 2009 2010 2011 2012 2013 *2014

Source: Cyberserwis, Euromonitor *) projected

A 100% subsidiary of Eurocash, KDWT is the domestic leader in active distribution of tobacco products. Its product range covers cigarettes and other tobacco goods, coffee, tea, confectionaries, batteries, telephone cards and non-prescription medicines. KDWT has over 140 branches, many of them at Eurocash Cash&Carry wholesale locations, together with two distribution centers. In 2012, KDWT generated PLN 2.6bn in external sales.


There are an estimated 9m smokers in Poland but cig-arettes sales have been shrinking steadily over the past years, parallel to growing excise duties. Tobacco products are being retailed at an estimated 120,000 points of sale throughout the country. Tobacco pro-ducers argue that every rise in taxation (in the case of cigarettes VAT and excise already represent approxi-mately 81% of the retail price) strengthens the shadow economy. Illegal cigarettes and tobacco are being es-timated at some 15% of total sales or approximately PLN 6bn. The KDTW & Kolporter tobacco alliance was an-nounced in December last year, shortly after British American Tobacco (BAT), one of Poland's top three tobacco producers, had decided to distribute its prod-ucts directly to sales points, bypassing third-party wholesalers and distributors. According to the compa-ny, its new distribution model were to create some 700 jobs with BAT and its logistics partners. Growing FMCG empire Ranked as Poland's 9th largest company by revenues, with sales of more than PLN 16.5bn in 2013 and more than 12,000 employees, Eurocash operates an FMCG distribution business, cash & carry warehouses, and a franchise chain of more than 6,000 small and medium-sized convenience stores "abc", which added some 600 new locations last year alone. In June Eurocash teamed up with HDS Polska, the Polish unit of France's Lagardère Services. Togeth-er, the two companies seek to strengthen their posi-tion in the convenience sector – the fastest growing segment of Poland's retail market, currently dominat-ed by Żabka Polska. Eurocash is to acquire from HDS Polska 51% of shares in a company that will operate the Inmedio chain, currently comprising 410 retail lo-cations, mostly in shopping centers. At the same time, a newly-formed subsidiary of Eurocash – Eurocash Convenience – is entering into a franchise agreement

with HDS, which allows it to use the '1minute' trade-mark to develop a chain of convenience stores that will combine food and FMCG products in attractive loca-tions.

RETAIL PROPERTIES

Rosehill acRosehill acRosehill acRosehill acquires large quires large quires large quires large Warsaw retail project Warsaw retail project Warsaw retail project Warsaw retail project with Griffin's moneywith Griffin's moneywith Griffin's moneywith Griffin's money

Galeria Młociny, a large retail and entertainment pro-ject in the north of Warsaw, conceived by Coimpex, a joint venture of Prelios and Grove International Partners, looks one step closer to fruition after it found a new owner in the shape of Rosehill Invest-ments. Co-owned by seasoned retail property inves-tor Paul Kusmierz, Rosehill has reportedly purchased the 51,000 sq.m site designated for Galeria Młociny and obtained a EUR 46m loan from Griffin Group to finance the transaction as well as preparatory work on the scheme. The loan was granted through a recently created plat-form – Griffin Property Finance II – which has a total of EUR 200m at its disposal. The transaction with Rosehill Investments is the first deal in which the plat-form has been involved. Griffin Property Finance II can grant loans at both the land acquisition and con-struction phases of the investment process. The plat-form can also finance existing developments which generate cash flow, said Przemysław Krych, the CEO of Griffin Group. As of the beginning of next year, Grif-fin Property Finance II will be headed by Maciej Tuszyński who will join Griffin Group from Westdeutsche ImmobilienBank where he is an ex-ecutive director and head of Poland.

As for Galeria Młociny, it was designed by the re-nowned architectural studio Kuryłowicz & Associates as a five-level structure with 67,000 sq.m of lettable area and 2,000 parking spaces. Coimpex, which ob-tained an environmental approval for the project last year, had estimated the total capex Galeria Młociny to reach some PLN 650m. The company also had plans for up to 200,000 sq.m of offices in the area, which were to be developed at a later stage. The local author-ities have welcomed the project as Warsaw's northern district of Bielany lacks a shopping and entertainment center. Thanks to the subway and the recently com-pleted bridge over the Vistula river the facility is likely to attract visitors from other areas of the city as well as the northern suburbs of Warsaw, which only recently got their first major shopping destination with the opening of Auchan Łomianki.

Galeria Młociny in the foreground with a new office cluster in the back, as imagined by Coimpex and Kuryłowicz & Associates. Image: Kurylowicz & Associates

Poland Today approached Coimpex spokesperson Ewa Kabata-Piekarz with questions about the Rosehill transaction, but the company does not seem to be ready to communicate any details as of yet.


"We cannot comment on the project at the moment," she said, declining also to disclose the total size of Coimpex's land holdings in the Młociny area. Post-industrial land of opportunity The key problem with the area surrounding Warsaw's northernmost subway station Młociny is its direct proximity to the ArcelorMittal Warszawa steel plant. Although south of the station, residential development has been booming, authorities did not permit homes to be built closer to the steel mill. The plant has consid-erably modernized and scaled down its operations over the years, but according to officials a "buffer zone" should be maintained between the industrial and residential areas. The mill's previous owners, the Italian Lucchini family, sold more than 90ha of devel-opment land between the station and the factory a few years ago to Italy's Pirelli Real Estate (now operating under the Prelios brand), which sought to use it for apartment blocks. When it became clear that residen-tial construction was not an option, and building apartments was no more the goldmine it used to be, the investors changed their concept for the area. They teamed up with private equity company Grove Inter-national Partners and set up Coimpex, which decided to build a giant shopping center and office park at the site. The investment is likely to give a much-needed boost to an area that has long lived in the shadow of a steel plant, but it will also put a pressure on authorities to implement a number of traffic improvements in the area. A portion of the cost will certainly have to be borne by the investors, but they will need support from the officials to overcome the many potential ad-ministrative hurdles. Aggressive property player Griffin Group was founded in 2006 as a joint-venture between Polish Cornerstone Partners and British Chelsfield Partners, as a platform to manage funds fo-

cused on real estate investment in Central and Eastern Europe, mainly in Warsaw. In March 2013 the global private equity giant Oaktree Capital Management joined the project with a view to create a long-term platform for real estate-related investments in Poland, including direct purchases of assets, development pro-jects and lending activities. Griffin and Oaktree had been cooperating since 2010 with the private equity partner providing the Warsaw-based property inves-tor with some EUR 150m for acquisition of several key assets, including Hala Koszyki, Meble Emilia, Renoma shopping center, office buildings in Warsaw and a land bank for residential development. Following the take-over of Chelsfield's stake in Griffin, as a shareholder, Oaktree pledged to invest a further EUR 200m into their projects.

Griffin's Hala Koszyki project will mix upscale retail outlets and offices. Image: Kurylowicz & Associates

Earlier this year Griffin has acquired the Jupiter shopping centre, along with 2.5 hectares of land, locat-ed at Towarowa St., right by the Rondo Daszyńskiego station on the new subway line, in the heart of War-saw's booming office district of Wola. According to market experts, the company will be able to develop more than 80,000 sq.m of offices or a large mixed-use project at this prime site. In the past few months Grif-fin has also added three office buildings in Warsaw to

its portfolio, for a combined PLN 200m. Recently the investor has broken ground on the EUR 80m Hala Koszyki mixed-use project in Warsaw, which is to reach completion by mid-2016 with 15,000 sq.m of of-fices and 6,000 sq.m of retail space at the site along with 200 parking spaces and a 600-sq.m public square. Perhaps the most publicized investment by Griffin was its 2012 acquisition of state-owned furniture retailer Meble Emilia, which owns a handful of attractive in-vestment sites in Warsaw, including the Emilia store, sandwiched between the Warsaw Financial Center and the Intercontinental hotel. The new owner seeks to knock down the two-story socialist-era building and erect a new skyscraper at the site. Besides a number of office buildings, Griffin's assets include also the Renoma shopping center in Wrocław, which the fund acquired for EUR 117.6m from Cen-trum Developments&Investments. The recently ex-panded land-mark property includes 31,000 sq.m of retail GLA and 10,000 sq,m of office space. In down-town Katowice, Griffin is developing a 21,000 sq.m shopping centre Supersam, with 100 retail outlets, cin-ema, fitness center, food court and 400 parking spaces. The project, most of which has already been pre-let, is to reach completion in 2015. The company is also in-volved in a number of residential projects.

POLITICS & ECONOMY

Industrial production Industrial production Industrial production Industrial production sees sees sees sees very very very very weak growth weak growth weak growth weak growth in Octoberin Octoberin Octoberin October

Poland's industrial output increased by 1.6% y/y in Oc-tober, a result that was only slightly higher than the median forecast (1.4%), and rose by 3.5% from the pri-


or month, the Central Statistical Office (GUS) said last week. The seasonally adjusted industrial output in Oc-tober was up by 1.5% y/y and up by 0.3% m/m. "In our view, the data confirm that activity in Polish industrial sector is slowing. The main source of a slowdown is worsening external demand and lower export orders," BZ WBK analysts said in a commen-tary, underlining, however, that among the industry segments with the highest y/y production increases there were still many export-oriented ones (for exam-ple, furniture 16.9%, computers and electronics 10.1%, machinery and tools 9.9%, electrical appliances 9%).

Industrial output & producer prices

-4%

-2%

0%

2%

4%

6%

8%

Feb

13

Apr

13

Jun

13

Aug

13

Oct

13

Dec

13

Feb

14

Apr

14

Jun

14

Aug

14

O

ct-

14

Industry output, y/y change

Producer Price Index, y/y change

Source: GUS, the central statistical office

Production in the construction sector declined by 1%, clearly below forecasts, adding to concerns about weak growth in the final months of the year. "We were hoping to see a rebound, not only due to un-usually good weather, but also thanks to higher in-vestment activity in the private sector and higher mu-nicipal investments ahead of the local elections," BZ WBK said.

Producer prices fell by 1.2% y/y and 0.3% m/m in Oc-tober. The PPI indicator has remained in the negative territory for 24 consecutive months. "Declining oil prices will put a negative pressure on PPI in the short term. In the medium term, PPI infla-tion will be limited by weaker economic activity, so we expect it to remain low in the quarters to come," the analysts added.

POLITICS & ECONOMY

PPPPO narrowly wins local O narrowly wins local O narrowly wins local O narrowly wins local elections, opposition elections, opposition elections, opposition elections, opposition demademademademands a rerunnds a rerunnds a rerunnds a rerun

The November 16 local elections have been a huge embarrassment for Poland's State Election Commis-sion (PKW) after problems with a new computer sys-tem used for counting votes had prevented the ballot from being tallied on time, leading to concerns about the overall validity of the vote. It took the commission nearly a full week to determine the results after tech-nical errors jeopardized the sending and printing of totals from individual precincts. Records showed PKW had selected a company to cre-ate the vote counting system as recently as August in a tender that attracted a single bidder. Following several awkward press conferences, which made it painfully clear that PKW had very limited understanding of the workings of the very system they were responsible for, the entire commission resigned last week. Adding insult to injury, hackers broke into PKW's da-tabases on Tuesday evening, although according to Po-land's security agency ABW the attack did not affect the vote counting system. Two days later, on Novem-

ber 20, a group of right wing activists stormed the PKW headquarters in Warsaw and began to occupy the building demanding the November 16 local gov-ernment elections be held again and calling for dismis-sal of PKW members over the vote counting fiasco. The police arrested 12 persons involved in the break-in. Despite exit polls indicating a clear win for the opposi-tion Law & Justice (PiS), the final results showed the ruling party Civic Platform (PO) take more seats in the regional assemblies. According to PKW officials PO has secured 179 seats in regional assemblies out of 555 total, followed by PiS with 169 seats and junior coali-tion partner Polish People's Party (PSL) with 159 seats. Leftist opposition Democratic Left Alliance (SLD) se-cured a mere 28 seats. According to the results, PO won in elections to eight regional assemblies, PiS in elections to six assemblies and PSL in two. The seat counts show that PiS won outright majority only in the Podkarpackie region, while PO-PSL coalition will likely secure majority in 14 regions, but will have to seek partners in the Śląskie region. PiS won the popular vote, according to the of-ficial results, with nearly 26.85% of the votes cast, while PO won nearly 26.36%. The exit poll had the numbers at 31.5% and 27.3%, respectively The chaos that ensued in the wake of the vote prompt-ed PiS to demand a rerun of the local election. The party's leader Jarosłąw Kaczyński said Sunday the election results were rigged and asked his supporters to pretest them at a demonstration on December 13. "What we are seeing is a threat to the democratic sys-tem, showing that in Poland the voting procedures have no real practical significance, that they serve to artificially legitimate the ruling powers," Kaczyński said.


OPINION

France and Poland: France and Poland: France and Poland: France and Poland: friendly relations, friendly relations, friendly relations, friendly relations, opposing economic opposing economic opposing economic opposing economic philosophiesphilosophiesphilosophiesphilosophies

by Poland Today Editor Andrew Kureth

Poland and France have a long history of friendly rela-tions, going at least as far back as Napoleon’s estab-lishment of the Duchy of Warsaw in 1807. During the 19th century, Poles emigrated to France in large num-bers, and some of the countries’ most famous names – from Chopin to Skłodowska-Curie – can be claimed by both countries. The cultural exchange and positive mutual feelings continue to this day and recently also the political relationship has made a resurgence. None too soon. At a moment when the European Un-ion economy is stagnating, countries need to come to-gether to find solutions that can be implemented con-tinent-wide. For one, Europe needs more digital inno-vation, and this is an area where France and Poland can cooperate. Poland is famous for its IT know-how and can-do work ethic. It is also a budding IT start-up hub. France has the global business experience, the in-frastructure, the institutions, the capital, and the con-nections to help multiply Polish raw talent into com-panies that could grow to be the European version of Google, Apple or Facebook.

That’s why I was excited to attend the French Cham-ber of Industry and Commerce’s “Warsaw Meetings” event last week. The conference brought together French and Polish business leaders and focused its discussions on how to take advantage of the digital revolution. But while there was broad agreement be-tween the French and Polish presenters that Europe needs to become more innovative, ideas about how to get there were depressingly disparate. The Poles largely saw the challenges of the digital age in internal terms: Europe and Poland need to work harder to make sure that technical innovations are ei-ther business-viable or meet the needs of business. The scientific and business communities need to work harder to come together, and the government needs to aid in building a framework for encouraging them to do so. Competition from Silicon Valley was not some-thing to protect Europe against, but rather a challenge to be embraced. The French focused on the external challenges – par-ticularly from the United States. The French speakers frequently made reference to Google and Facebook as villains who needed to be fined, limited, and taxed. But the Poles usually spoke of the external challenges in terms of security threats: Russian hacker attacks on European government and banking systems, or terror-ist groups such as ISIS finding in the internet a power-ful recruiting tool. For the French, these threats weren’t even on the radar. The French should listen carefully to their Polish counterparts. As former Polish Minister of Admini-stration and Digitization Michał Boni said at the con-ference: “We shouldn’t look for scapegoats. It’s not true that it is Facebook’s or Google’s fault that we are behind. It’s because of our own weakness.” But rather than seeing an area where muscle needs to be built, many of the French speakers seemed to con-

sider European weakness as an Achilles Heel to be shielded. French Member of Parliament Jérôme Char-tier reiterated the familiar French call for a Europe-wide tax, saying that this would represent a “beautiful gesture” of solidarity within Europe. One panel dis-cussion leader, a Pole, told me after his session was over that he was “depressed” because all of the French speakers had said they were losing to the Americans, and that the solution was to create protection through taxing American investment. The Polish view is much different. They see American dominance in the digital economy as an opportunity, not an attack. Poles are creating start-ups and invest-ing in technology with the hopes of one day being bought by these titans, if not potentially competing with them in the future. So Poland has an important role to play in convincing its French allies that competition should be welcomed, not warded off. Cooperating together, Europe’s com-bined strengths can compete with those of the Ameri-cans or the Chinese. That doesn’t mean increasing taxes and creating huge government innovation slush funds that induce companies to invest more in navigat-ing grant bureaucracy than developing innovative technologies; it comes through opening up economies, and providing the infrastructure and frameworks mak-ing it easier for European innovators to cooperate. It’s an uphill battle, but more are coming over to the Polish side. The French businesspeople living in Po-land with whom I spoke generally shared the Polish view rather than that of their compatriots. Their ex-perience here has shown them that an open economy pays more dividends than a closed one. If Poland suc-ceeds in convincing French leaders of this, that would be its most significant contribution to the French-Polish exchange.


KEY STATISTICS

Consumer PricesConsumer PricesConsumer PricesConsumer Prices

Data in (%) Jul '14 Aug '14 Sep '14 Oct '14

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

Food & bev -1.7 -1.1 -2.1 -1.6 -2,0 +0.1 -2.2 -0.2

Alcohol, tobacco +4.0 0.0 +3.8 0.0 +3.6 0.0 +3.6 0.0

Clothing, shoes -4.9 -2.8 -5.1 -2.7 -4.7 +1.1 -4.6 +3.4

Housing +0.6 0.0 +0.6 +0.1 +0.5 +0.1 +0.5 +0.1

Transport -1.0 +0.8 -1.5 0.0 -3.2 -1.0 -3.0 -0.8

Communications +2.6 +1.2 +3.9 +1.3 +4.0 0.0 -0.4 -0.3

Gross CPI -0.2 -0.2 -0.3 -0.4 -0.3 0.0 -0.6 0.0

IIIInflationnflationnflationnflation

-1%

0%

1%

2%

3%

4%

Oct 12

Dec 12

Feb 13

Apr 13

Jun 13

Aug 13

Oct 13

Dec 13

Feb 14

Apr 14

Jun 14

Aug 14

Oct 14

y/y m/m

Retail TurnoverRetail TurnoverRetail TurnoverRetail Turnover

Month May '14 Jun '14 Jul '14 Aug '14 Sep '14

m/m (%) -2.7 -1.1 +4.7 -1.1 -0.9

y/y (%) +3.8 +1.2 +2.1 +1.7 +1.6

Year 2009 2010 2011 2012 2013

Turnover in PLNbn 582.8 593.0 646.1 676.0 685.7

y/y (%) +4.3 +5.5 +11.6 +5.6 +2.3

Residential ConstructionResidential ConstructionResidential ConstructionResidential Construction

Dwellings

(in '000 units)

2009 2010 2011 2012 2013 Jan-Oct

2014

y/y

(%)

Permits 178.8 174.9 184.1 165.1 138.7 133.6 +14.2

Commenced 142.9 158.1 162.2 141.8 127.4 129.0 +15.6

U. construction 670.3 692.7 723.0 713.1 694.0 709.4 +0.1

Completed 160.0 135.7 131.7 152.5 146.1 114.2 -2.0

Source: Central Statistical Office (GUS)

GGGGross Domestic Productross Domestic Productross Domestic Productross Domestic Product (ESA2010)

Period Growth y/y unadjusted

GDP in PLN bn current prices

Current account def. in % of GDP

Q3 2014 +3.3% n/a n/a

Q2 2014 +3.5% 413,457 -1.2%

Q1 2014 +3.4% 397,429 -1.2%

Q4 2013 +3.0% 455,528 -1.3%

2013 +1.7% 1,662,052 -1.3%

2012 +1.8% 1,615,894 -3.6%

2011 +4.8% 1,553,582 -5.0%

2010 +3.7% 1,437,357 -5.1%

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

Indicator 2011 2012 2013 *2014 *2015

GDP change +4.5% +1.9% +1.6% +3.1% +3.1%

Consumer inflation +4.3% +3.7% +0.9% +0.1% +0.6%

Producer inflation +7.6% +3.4% -1.3% -1.2% +0.7%

CA balance, % of GDP -5.0% -3.7% -1.4% -1.6% -2.6%

Nominal gross wage +5.2% +3.7% +3.4% +3.5% +4.0%

Unemployment** 12.5% 13.4% 13.4% 11.8% 11.5%

EUR/PLN 4.12 4.19 4.20 4.18 4.13

Sources: NBP, BZ WBK, PKO BP, GUS *) projections **) year-end

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

Sector Q3 2013 Q4 2013 Q1 2014 Q2 2014

A B A B A B A B

Coal mining 6,061 138 8,615 196 6,333 144 6,382 145

Manufacturing 3,625 158 3,690 161 3,663 160 3,743 163

Energy 6,021 183 6,736 205 6,358 193 6,020 183

Construction 3,766 160 3,895 166 3,706 158 3,884 166

Retail & repairs 3,408 145 3,456 147 3,544 151 3,577 153

Transportation 3,589 127 3,913 138 3,666 130 3,650 129

IT, telecoms 6,654 173 6,695 174 6,987 181 6,835 177

Financial sector 6,109 137 6,602 148 6,747 152 6,738 151

National average 3,652 145 3,823 152 3,895 155 3,740 149


Construction OutputConstruction OutputConstruction OutputConstruction Output

Month Apr '14 May '14 Jun '14 Jul '14 Aug '14 Sep '14 Oct '14

m/m (%) +3.2 +14.0 +16.9 +0.9 -5.4 +19.8 +7.2

y/y (%) +12.2 +10.0 +8.0 +1.1 -3.6 +5.6 -1.0

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +15.5 +12.1 +5.1 +4.6 +11.8 -0.6 -12.0

Source: The Central Statistical Office of Poland, GUS

Sentiment IndicatorsSentiment IndicatorsSentiment IndicatorsSentiment Indicators

Economic sentiment and consumer confidence indicators

-40

-20

0

20

Jan 12

Apr 12

Jul 12

Oct 12

Jan 13

Apr 13

Jul 13

Oct 13

Jan 14

Apr 14

Jul 14

Oct 14

60

80

100

120 Consumer confidence (left axis) Economic sentiment (right 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 PricesProducer PricesProducer PricesProducer Prices

Month Apr'14 May'14 Jun'14 Jul'14 Aug'14 Sep'14 Oct'14

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

y/y (%) -0.7 -1.0 -1.8 -2.1 -1.5 -1.6 -1.2

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +2.0 +2.2 +3.4 +2.1 +7.6 +3.3 -1.3

Construction PricesConstruction PricesConstruction PricesConstruction Prices

Month Apr'14 May'14 Jun'14 Jul'14 Aug'14 Sep'14 Oct'14

m/m (%) -0.1 -0.1 0.0 0.0 0.0 0.0 0.0

y/y (%) -1.5 -1.5 -1.4 -1.2 -0.9 -0.8 -0.7

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +7.4 +4.8 +0.2 -0.1 +1.0 +0.2 -1.8

Industrial OutpuIndustrial OutpuIndustrial OutpuIndustrial Outputttt

Month Apr '14 May '14 Jun '14 Jul '14 Aug '14 Sep'14 Oct'14

m/m (%) -2.3 -1.7 -0.1 +2.0 -8.5 +16.5 +3.5

y/y (%) +5.4 +4.4 +1.7 +2.3 -1.9 +4.2 +1.6

Year 2007 2008 2009 2010 2011 2012 2013

y/y (%) +10.7 +3.6 -3.5 +9.8 +7.7 +1.0 +2.2


TTTTraderaderaderade

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

EXPORTS in PLN bn IMPORTS in PLN bn

Jan-Aug 2014

y/y (%)

share (%)

2013 share (%)

Jan-Aug 2014

y/y (%)

share (%)

2013 share (%)

Food and live animals 47,583 +4.7 10.8 69,304 10.9 32,301 +4.4 7.3 47,906 7.4

Beverages and tobacco 6,653 +17.4 1.5 8,624 1.4 2,752 +4.9 0.6 4,150 0.6

Crude materials except fuels 11,094 +2.8 2.5 15,744 2.5 14,207 -1.9 3.2 21,585 3.3

Fuels etc 18,587 -6.2 4.2 30,013 4.7 49,238 +1.1 11.1 75,539 11.7

Animal and vegetable oils 1,303 +6.8 0.3 1,864 0.2 1,746 -0.9 0.4 2,646 0.4

Chemical products 40,967 +4.2 9.3 59,103 9.3 66,751 +6.5 15.0 92,917 14.3

Manufactured goods by material 88,764 +2.3 20.1 129,915 20.3 79,720 +7.0 17.9 112,392 17.3

Machinery, transport equip. 166,823 +5.4 37.8 239,434 37.5 146,209 +3.1 32.8 216,608 33.4

Other manufactured articles 59,131 +10.3 13.4 82,816 13.0 43,864 +15.2 9.8 58,210 9.0

Not classified 597 n/a 0.1 1,782 0.2 8,838 n/a 1.9 16,242 2.6

TOTAL 441,502 +4.6 100 638,599 100 445,626 +4.4 100 648,195 100

Poland's ten largest trading partners, ranked according to 2013

EXPORTS in PLNbn IMPORTS in PLN bn

No Country Jan-Sep 2014

share 2013 share No Country Jan-Sep 2014

share 2013 share

1 Germany 130,588 26.0% 162,548 25.1% 1 Germany 110,259 21.8% 142,161 21.7%

2 UK 31,921 6.3% 42,138 6.5% 2 Russia 56,611 11.2% 79,578 12.1%

3 Czech Rep. 31,337 6.2% 40,110 6.2% 3 China 51,722 10.2% 61,127 9.3%

4 France 28,306 5.6% 36,367 5.6% 4 Italy 27,064 5.3% 34,940 5.3%

5 Russia 22,273 4.4% 34,069 5.3% 5 Netherlands 18,914 3.7% 25,409 3.9%

6 Italy 22,732 4.5% 27,958 4.3% 6 France 19,371 3.8% 25,041 3.8%

7 Netherlands 20,689 4.1% 25,707 4.0% 7 Czech Rep. 17,731 3.5% 24,054 3.7%

8 Ukraine n/a n/a 18,020 2.8% 8 USA 12,109 2.4% 17,431 2.7%

9 Sweden 14,417 2.9% 17,581 2.7% 9 UK 13,008 2.6% 17,184 2.6%

10 Slovakia 12,655 2.5% 17,099 2.6% 10 Belgium 12,581 2.5% 15,137 2.3%


CurrencyCurrencyCurrencyCurrency

Central Bank average rates

as of 21 November 2014

100 USD 338.27 ↓

100 EUR 420.88 ↓

100 GBP 529.04 ↓

100 CHF 350.11 ↓

100 DKK 56.55 ↓

100 SEK 45.57 ↓

100 NOK 49.96 ↓

10,000 JPY 287.34 ↓

100 CZK 15.20 ↓

10,000 HUF 138.30 ↑

100 USD/EUR against PLN

300

350

400

450

9 D

ec 13

19 Feb 14

29 A

pr 14

8 Jul 14

15 Sep 14

21 Nov 14

USD EUR

MMMMoney Supplyoney Supplyoney Supplyoney Supply

in PLN m Jun '14 Jul '14 Aug '14 Sep '14

Monetary base 173,096 164,008 167,008 166,104

M1 572,376 570,507 574,529 578,485

- Currency outside banks 120,828 122,209 124,986 124,389

M2 980,090 985,769 1,003,128 1,003,354

- Time deposits 426,351 434,256 448,037 444,514

M3 996,171 1,002,137 1,020,561 1,021,824

- Net foreign assets 290,786 301,207 304,359 310,172 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 Jun' 14 Jul' 14 Aug' 14 Sep' 14

Loans to customers 940,703 939,641 950,774 954,978

- to private companies 276,709 274,549 277,482 280,248

- to households 578,639 581,447 587,136 590,208

Total assets of banks 1,667,783 1,678,129 1,718,251 1,737,728

Source: Central Bank NBP

IIIInterest ratesnterest ratesnterest ratesnterest rates

Average weighted annual interest rates

on loans to non-financial corporations

Term / currency Apr '14 May '14 Jun '14 Jul '14 Aug '14 Sep '14

PLN (up to 1 year) 4.4% 4.4% 4.5% 4.4% 4.4% 4.4%

PLN (up to 5 y ) 4.8% 4.8% 4.8% 4.7% 4.8% 4.7%

PLN (over 5 y) 4.7% 4.7% 4.7% 4.7% 4.7% 4.7%

PLN (total) 4.7% 4.7% 4.7% 4.7% 4.7% 4.7%

EUR (up to 1m EUR) 2.0% 2.0% 1.9% 1.7% 1.6% 1.6%

EUR (over 1m EUR) 3.0% 2.7% 3.4% 3.1% 2.5% 2.5%

Warsaw Inter Bank Offered Rate (WIBOR) as of 21 Oct 2014

Overnight 1 week 1 month 3 months 6 months

2.11% 2.08% 2.08% 2.06% 2.05%

Central Bank (NBP) Base Rates

Reference Lombard NBP deposit Rediscount

2.00% 3.00% 1.00% 2.25%

Stock ExchangeStock ExchangeStock ExchangeStock Exchange

Warsaw Stock Exchange, rates in PLN

WIG-20 stocks in alphabetical

order

Price 21 Nov '14

Change 14 Nov

'14

Change end of

'13

→ Alior Bank 77.06 0% -5%

↑ Asseco Pol. 53.5 +6% +16%

↓ Bogdanka 107.4 -1% -15%

→ BZ WBK 387.95 0% 0%

↑ Eurocash 37.2 +7% -22%

→ Grupa Lotos 27.63 0% -22%

↓ JSW 21.3 -8% -60%

→ Kernel 24.46 0% -36%

↑ KGHM 127.25 +2% +8%

↑ LPP 9,000 +2% 0%

↑ mBank 498 +1% 0%

↓ Orange Pol. 9.43 -3% -4%

↓ Pekao 177 -2% -1%

↓ PGE 20.50 -1% +26%

↑ PGNiG 4.95 -2% -4%

→ PKN Orlen 45.65 0% +11%

↓ PKO BP 36.9 -1% -6%

↑ PZU 477.85 +1% +6%

→ Synthos 4.29 0% -22%

↑ Tauron 5.43 +2% +24%

Source: Warsaw Stock Exchange

Key indices

as of 21 November 2014

WIG Total index

55553333,,,,215215215215....87878787 Change 1 week 0% →

Change end of '13 +4% ↑

WIG-20 blue chip index

2,2,2,2,444418181818....26262626 Change 1 week 0% →

Change end of ' +1% ↑

WIG Total closing index

last three months

51,000

52,000

53,000

54,000

55,000

56,000

22 A

ug 14

15 Sep 14

7 O

ct 14

29 O

ct 14

21 Nov 14


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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-Sep 2014 *

Monthly wages (PLN)

Jan-Sep 2014**

Unemploy-ment

Sep 2014

New dwellings Jan-Sep 2014

Indus-

try

Constru-

ction

Indus-

try

Constru-

ction

in '000 % Num-

ber

Index *

Dolnośląskie (Wrocław) 102.7 109.7 4,381 4,237 125.7 10.9 9,505 78.7

Kujawsko-Pomorskie (Bydgoszcz) 104.6 109.1 3,449 3,312 126.4 15.7 4,448 96.6

Lubelskie (Lublin) 102.2 83.6 3,740 3,088 113.9 12.4 3,882 88.2

Lubuskie (Zielona Góra) 115.5 104.8 3,482 3,083 47.4 12.8 2,170 97.3

Łódzkie (Łódź) 100.9 110.5 3,748 3,335 128.4 12.1 4,673 101.0

Małopolskie (Kraków) 100.9 105.7 3,842 3,389 137.3 9.8 11,126 100.0

Mazowieckie (Warszawa) 100.0 107.1 4,629 4,970 254.6 10.0 21,956 111.1

Opolskie (Opole) 106.0 119.9 3,654 3,567 42.7 12.0 1,315 100.6

Podkarpackie (Rzeszów) 102.4 112.2 3,422 3,126 132.3 14.3 4,691 107.0

Podlaskie (Białystok) 107.2 119.2 3,330 3,940 60.3 13.1 2,836 103.5

Pomorskie (Gdańsk-Gdynia) 108.5 119.9 4,039 3,485 95.2 11.2 6,768 79.7

Śląskie (Katowice) 101.0 108.1 4,577 3,556 178.7 9.8 7,375 94.6

Świętokrzyskie (Kielce) 107.9 101.5 3,444 3,335 76.0 14.3 2,481 141.5

Warmińsko-Mazurskie (Olsztyn) 104.7 111.5 3,297 3,170 93.9 18.2 3,020 100.9

Wielkopolskie (Poznań) 106.4 102.8 3,758 3,794 118.0 7.9 9,875 101.2

Zachodniopomorskie (Szczecin) 103.9 103.3 3,557 3,500 91.1 15.2 4,017 99.7

National average 103.4 107.4 4,016 3,821 1,821.9 11.5 100,138 98.1

*) 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 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14

in Poland 2,886 175 -3,020 1,885 -2,899 2,771

Polish DI -1,203 957 2,588 -1,449 1,575 562

Year 2008 2009 2010 2011 2012 2013

in Poland 10,128 9,343 10,507 14,896 4,763 -4,574

Polish DI -3,072 -3,335 5,484 -5,935 -607 3,684

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

Period 2011 2012 2013 Q4 '13 Q1 '14 Q2 '14

Trade balance -10,059 -5,175 2,309 138 159 71

Services, net 4,048 4,642 5,249 1,941 1,684 2,013

CA balance -18,519 -14,191 -4,984 -1,324 -1,403 -553

CA balance vs GDP -5.0% -3.7% -1.3% -1.3% -1.1% n/a

Source: NBP, BZ WBK, PKO BP

UUUUnemploymentnemploymentnemploymentnemployment

Registered unemployed, in ‘000 and

% of population in working age

1,800

2,000

2,200

2,400

2,600

Q3 1

1

Q1

12

Q3

12

Q1

13

Q3

13

Q1

14

Q3 1

4

6

9

12

15 number (left axis) % (right axis)

Source: Central Statistical Office GUS

IndustrIndustrIndustrIndustrial ial ial ial PropertiesPropertiesPropertiesProperties

by region, 1H 2014

Existing stock, sq.m

Under const ruction, sq.m

Va-cancy ratio

Effective rents EUR/ sq.m/mth

Warsaw central 617,000 8,000 14.7% 1–5.0

Warsaw suburbs 2,137,000 14,000 11.3% 1.9–3.2

Central Poland 1,107,000 59,000 11.7% 1.9-3.1

Poznań 1,100,000 316,000 1.9% 2.3–2.9

Upper Silesia 1,576,000 57,000 7.9% 2.3–3.1

Wrocław 939,000 315,000 6.2% 2.4–3.0

Tri-city 215,000 45,000 4.2% 2.2–3.7

Kraków 159,000 11,000 1.9% 3.5-4.0

Homes & CHomes & CHomes & CHomes & Commercialommercialommercialommercial PropertiesPropertiesPropertiesProperties

City

New apartments* Offices 1H'14 Retail rents**1H'14

Q2 '14

PLN/sq.m

Change

y/y

Headline

rents**

Vacancy

ratio

Retail

centres

High

streets

Warsaw 7,924 -2.0% 11 -25 13.35% 100-120 148

Kraków 6,389 +6.0% 13.5-14.5 3.6% 35-40 78

Katowice 5,602 -3.7% 11.5-13.8 5.4% 35-40 50

Poznań 6,552 +3.3% 14-15 11.5% 35-40 62

Łódź 4,936 +2.6% 11.5-12.5 10.6% 35-40 78

Wrocław 6,092 +2.0% 14.15 10.9% 35-40 45

Tricity 6,092 -4.9% 12.8-13.5 11.5% 35-40 40

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

Country Credit Country Credit Country Credit Country Credit RatingsRatingsRatingsRatings

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

Oct10

Jun11

Feb12

Oct12

Jun13

Feb14

Oct14

Wage CPI

Index 100 = Jan 2005. Source: GUS

Documents

Poland Today Business Review+ No. 62