Poland Today Business Review+ No. 64

No. 064 / 8th December 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

1 year subscription: EUR 690 +VAT (23%)

Newsletter Editor: Lech Kaczanowski

[email protected]

tel. +48 607 079 547

Sales Contact: James Anderson-Hanney

[email protected]

tel. +48 881 650 600

BANKING & FINANCE

Banco Santander shares debut on Warsaw bourse page 3 Poland's debt market attracts foreign players page 3

PROPERTY & CONSTRUCTION

Warsaw IPO to help construc-tion firm Dekpol diversify rev-enue streams page 5 Developer Euro-Styl begins new office project in Gdańsk page 6

ONLINE MEDIA

Top Polish portals boost user numbers through acquisitions page 7

TRANSPORT & LOGISTICS

PKP Cargo to downsize 1,300 staff through voluntary leaves page 8

RETAIL

New grocery chain to launch in January with 170 outlets page 8

RETAIL PROPERTIES

Rank Progress opens retail park in Krosno, gets permit for Mielec page 9

POLITICS & ECONOMY

Manufacturing PMI shoots up in November page 10 Poland improves its ranking in Transparency Interna-tional's Corruption Percep-tions Index page 11

OPINION

The Canadian initiative: connect to innovate page 12

KEY FIGURES

Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 13-15

The Bielsko-Biała plant will be GE's first "brilliant factory" in Europe. Image: GE

GE building new plant in BielskoGE building new plant in BielskoGE building new plant in BielskoGE building new plant in Bielsko----BiałaBiałaBiałaBiała US industry giant GE has broken ground on a high tech produc-tion unit and customer experience center in the southern Polish city of Bielsko-Biała. The facility is to launch by the end of 2015, with the potential of adding up to 400 new positions to the 800 staff the company has in Bielsko. It will focus on the production of electrical distribution and critical power equipment. page 2

weekly newsletter # 064 / 8th December 2014 / page 2

MANUFACTURING & PROCESSING

GE breakGE breakGE breakGE breakssss ground on ground on ground on ground on USD 54m 'brilliant' USD 54m 'brilliant' USD 54m 'brilliant' USD 54m 'brilliant' factory in Bielskofactory in Bielskofactory in Bielskofactory in Bielsko----BiałaBiałaBiałaBiała

US industry giant GE has broken ground on a brand new 45,000-sq.m factory in the southern Polish city of Bielsko-Biała. The USD 54m project will include a 45,000 sq.m advanced manufacturing plant, developed in accordance with GE's new "brilliant factory" philos-ophy, as well as a customer experience center. Devel-oped by industrial property firm Panattoni, the facili-ty will be operational by the end of 2015. Once com-plete, the new factory will be one of the largest in the region, capable of employing up to 1,200 staff. "Currently our Bielsko-Biała operations are spread across 16 buildings and four sites, which will all be consolidated at the new factory by the end of next year," Monika Doroz, Communications Manager Po-land & Baltics at GE tells Poland Today. "Our current 800 staff in Bielsko-Biała will make up the core staff of the new unit and additional placements will be made when necessary." GE's existing Bielsko-Biała operations manufacture electrical distribution and critical power equipment such as low- and medium-voltage switchgear, control cabinets, panels and metal enclosures, as well as AC and DC breakers and uninterrupted power supply products for commercial, industrial, renewable and mission-critical applications such as municipalities, oil and gas, wind turbines, data centers and hospitals. The facility, which is also a center of excellence for GE's IEC low-voltage equipment development, was recog-nized as one of GE's top performing plants in 2004, 2009, 2011 and 2013. The company's current opera-

tions in Bielsko-Biała, divided between four locations, will all be relocated to the new unit. The new Bielsko-Biala facility will enable GE to accel-erate product development and manufacturing by combining engineering, development, testing and manufacturing operations in a centralized, high-tech environment, GE said. In addition, the site will serve as a new regional customer experience center where customers will be invited to interact with GE's latest electrical distribution and critical power products and to share real-time feedback throughout the develop-ment process. "Whether it's through exceptional quality, product life cycle management or reduced lead times, this new fa-cility will enable us to deliver simpler, smarter and faster solutions to our customers," said Stuart Thomp-son, general manager, Power Equipment, GE's Indus-trial Solutions business.

The new Bielsko-Biała plant will consolidate GE's ex-isting operations in the city. Image: GE

The Bielsko-Biała plant will be one of the first GE plants worldwide developed in line with chief execu-tive Jeff Immelt’s vision of the "brilliant factory": a dy-namic system in which machine parts constantly relay information to operators, who can schedule mainte-

nance before equipment fails, all the while improving the manufacturing process. Over the past years the company has installed thousands of sensors at its fac-tories worldwide, which gather data at each step of the manufacturing process, in order to help GE determine which conditions correlate with the best products. One of the improvements that will be a standard fea-ture at all new GE plants, including Bielsko-Biała, are 3D printers, used to customize and print new compo-nents on-site. This is GE’s version of the "Internet of Things", a term often applied to a connected network of smartphones and home appliances; GE executives call it the "Industrial Internet."

SOME KEY FEATURES OF GE'S NEW BIELSKO-BIAŁA PLANT: • Low- and Medium-Voltage IEC Product Certification Lab for sharing prototypes and design concepts with

customers. The lab will comply with equipment testing standards to gain third-party approvals, saving both time and money in the development process. • Product Accelerator Lab for rapid prototyping and

technology. GE's engineering experts will be able to invent, design and test multiple solutions at once while

gaining real-time customer feedback throughout the development process. • Enhanced showroom to engage customers in devel-oping products and technology.

• Customer and Employee Training Center for contin-uous learning opportunities, including new product in-

troductions and processes.

GE has a strong, export-oriented industrial base in Central and Eastern Europe, with 26,000 employees in the region, of which some 10,000 in Poland. GE Power Controls, (part of GE Industrial) has factories in Po-land (in Kłodzko, Łódź and Bielsko-Biała), whereas GE Aviation operates a manufacturing unit in Dzierżoniów. With a staff of 1,700 engineers the War-


saw-based GE Engineering Design Center (EDC) is one of the company's most advanced R&D units, work-ing for the Aviation, Energy, as well as Oil & Gas in-dustries. Last year its unit GE Healthcare set up an It center in Kraków, which has created 50 positions to-date. GE's financial services unit GE Capital owns Bank BPH, one of Poland's top banks, although recent-ly the US investor has officially signaled its intention of selling the business. The combined turnover of GE's Polish operations came to PLN 4bn in 2013.

BANKING & FINANCE

Banco Santander Banco Santander Banco Santander Banco Santander shares debut on shares debut on shares debut on shares debut on Warsaw bourseWarsaw bourseWarsaw bourseWarsaw bourse

Shares in Spanish Banking giant Banco Santander gained about 1% on their trading debut on the Warsaw Stock Exchange last Wednesday. Shares were trading at PLN 30.57 against the reference price of PLN 30.26. Santander was requested to list on the Warsaw bourse by the Polish banking sector watchdog KNF. This was one of several conditions under which in 2012 KNF al-lowed the Spaniards take over the Polish lender BZ WBK and merge it with Kredyt Bank. Santander, which acquired BZ WBK in 2011 and later merged it with competitor Kredyt Bank SA, has re-cently cut its stake in BZ WBK stake to comply with another requirement of the Polish financial supervisor. The Spanish bank in 2012 agreed to boost the propor-tion of BZ WBK shares which are available to other investors, or, in other words, increase its free-float to at least 30% by the end of 2014. It sold a 5.2% stake in BZ WBK on the Warsaw Stock Exchange last year, and a further 2% in October 2014. Following these transac-tions, Santander holds a 69.4% stake in BZ WBK.

Banco Santander is the largest financial group in Spain and South America, with a market cap of EUR 91.5bn and total assets of nearly EUR 1.3 trillion (compared to Poland largest lender PKO BP's asset portfolio of EUR 47.3bn). It operates also in the UK, Portugal, Germany, and north-eastern USA, and besides Warsaw, its shares are listed in Madrid, Milan, Lisbon, London, New York and Buenos Aires. Santander serves 107m clients via a network of 13,000 branches and a staff of 183,000. The key source of revenues for the group is retail banking.

BZ WBK is Poland's third largest bank Poland's largest banks; total assets as of end of 2013 in EURbn

0 10 20 30 40 50

BPH

Citibank Handlowy

Raiffeisen Polbank

Bank Millennium

Getin Bank

ING

mBank

BZ WBK

Pekao SA

PKO BP

Source: KNF, Intelace

The Spanish bank has been operating on the Polish market since 2002, initially through its subsidiary AKB and later via Santander Consumer Bank, which in 2011 acquired AIG Bank Polska, the Polish arm of the crisis-stricken US financial giant AIG. Santander subse-quently took over the Polish units of two European

groups that were badly hit by the global financial cri-sis, Belgium's KBC (Kredyt Bank) and Ireland's AIB (BZ WBK). In July 2014 Santander Consumer Bank was incorporated into BZ WBK, which is now Santan-der's main Polish operation and Poland's third largest bank, with EUR 24.9bn worth of assets as of end of 2013.

BANKING & FINANCE

Poland's debt market Poland's debt market Poland's debt market Poland's debt market attracts foreign players attracts foreign players attracts foreign players attracts foreign players

Poland's debt restructuring market, which has so far been largely the domain of local companies, is begin-ning the catch the attention of foreign investors. The past few months saw two Nordic players and one pri-vate equity investor acquire major Polish debt pur-chasers and according to market insiders more deals are to be expected shortly. In November, Sweden's Hoist Finance, a pan-European debt purchase company has entered into an agreement to acquire Navi Lex, a Wrocław-based Polish debt collection company, for an undisclosed amount. Navi Lex was established in 2010 and has since grown into one of the major debt collection companies in the Polish market with approximately 130 employees. It has established relations with a large number of originators, predominantly within the fi-nancial institutions and telecom industries. "Through our 11 collection platforms Hoist Finance is present within debt purchase in eight countries. To-gether with our model for amicable settlements, our local platforms are of benefit to our customers and the international banks and financial institutions we part-ner with. Having our own collection platform in Po-


land will increase our operational flexibility and facili-tate Hoist Finance to capture the investment opportu-nities in the Polish market going forward," Charles de Munter, Regional Managing Director of Hoist Finance Belgium, the Netherlands, Italy, France and Poland, tells Poland Today.

Bank debt sale transactions in PLNbn

0

2

4

6

8

10

12

20

08

20

09

20

10

20

11

20

12

*20

13

*20

14

Source: Best, Rzeczpospolita *) January-October estimate

Following the transaction, NaviLex CEO Tomasz Lebek will assume the position as Head of Hoist Fi-nance Poland. Karol Piętka, currently Head of Opera-tions Hoist Finance Poland, will become deputy CEO with responsibility for sales and investments. Hoist Finance offers solutions for acquisition and management of non-performing unsecured consumer loans to global banks and financial institutions. The total carrying value of Hoist Finance’s acquired loans is approximately EUR 810m. "Our ambitions are not contained to any specific mar-ket, we will remain a trusted debt restructuring part-ner to international banks and aim to be one of the leading debt purchasing companies in Europe in our niche, non-performing unsecured consumer loans. We

were the largest purchaser of portfolios in Europe within our segment last year, and we continue to see interesting opportunities all over Europe, Poland in-cluded." Consolidation gathers pace Back in July, Norwegian receivables management firm B2Holding acquired Polish rival Ultimo from private equity fund Advent as part of B2Holding's strategy to expand in central and eastern Europe. Advent, which owned nearly 90% of Ultimo before the deal, did not disclose the sale price, but said Ultimo was managing a portfolio of debts with a face value of over PLN 10.5bn making it one of the market leaders in Poland. B2Holding said that the transaction will increase the number of its employees to more than 1,000. "B2Holding's strategy is to be the pre-eminent debt purchase and loan servicing platform in the Nordics and CEE," Jon Nordbrekken, chairman of B2Holding, commented on the deal. Also in July, a fund belonging to Franco-Italian private equity group 21 Partners acquired Polish debt collec-tion firm EGB Investments SA. The Bydgoszcz-based company manages collection of consumer and corporate debt for banks, financial institutions, tele-communications, and utilities companies in Poland. EGB generates sales in excess of PLN 50m with an EBIDTA margin in excess of 15%. In addition to the core debt collection and receivables management ser-vices, the company provides liquidity enhancement so-lutions for small and micro enterprises through its subsidiary EGB Finanse. The transaction was driven by 21 Concordia, a War-saw-based fund focused on Polish mid-market compa-nies, set up by 21 Partners in November 2013 with a closing at EUR 60m in aggregate commitments.

Poland's receivables market has been growing steadily since 2009, reaching PLN 20.9bn nominally last year, up from PLN 19.2bn in 2012, including both the debt collection market as well as bank debt portfolio trans-actions. The latter came to an estimated PLN 12bn in the first ten months of 2014, up from a full-year figure of PLN 9.5bn in 2013. The leading player in the sector is Polish company Kruk, which acquired receivables with a nominal value of PLN 2.2bn in Q1-Q3 2014 for approximately PLN 335m. Last week the company won a tender to buy a mortgage debt portfolio with a nominal value of PLN 443m from the bank BZ WBK.

Top 10 debt restructuring firms Receivables purchased & accepted for collection in PLN m

2013 2012

Kruk 5,111 5,474

Ultimo 2,500 900

GK Best 1,124 1,600

Casus Finanse 1,106 1,138

EGB Investments 1,105 491

Navi Group 846 1,315

DTPartners 718 534

Kaczmarski Inkasso 633 394

e-Kancelaria 606 1,057

Kredyt Inkaso 374 782

Source: Parkiet

"Banks all over Europe see an increasing need to divest portfolios of non-performing consumer loans, follow-ing the increased capital ratios and the implementa-tion of the Basel III regulation. We follow our key debt originator partners across markets and often purchase portfolios in several countries where they have opera-tions. This will create many opportunities in the mar-ket and we have positioned ourselves in order to ena-ble us to capture these opportunities as they arise," Hoist Finance's Charles de Munter explains the recent trend towards consolidation in the sector.



Warsaw IPO to help Warsaw IPO to help Warsaw IPO to help Warsaw IPO to help construction firm construction firm construction firm construction firm Dekpol diversify Dekpol diversify Dekpol diversify Dekpol diversify revenue streamsrevenue streamsrevenue streamsrevenue streams

Polish construction, development and production company Dekpol is gearing up for a listing on the Warsaw Stock Exchange in the coming weeks, hoping to raise PLN 70m to finance its market expansion. At the moment, the company operates primarily as a gen-eral contractor as well as residential developer with projects in Gdańsk and Tczew. Recently, however, Dekpol has been expanding a third leg of its business - a production unit making machinery parts, mainly ex-cavator buckets. The key priority for the company is to raise PLN 15m for boosting the working capital of its general con-struction unit and PLN 20m for the expansion of its parts factory that is intended to quadruple the latter's production capacity. "We are cooperating with the dealers of CAT, Volvo, Terex and Komatsu building machinery, supplying them with excavator buckets. At the same time, we are undergoing audits by OEM suppliers of the said pro-ducers, which we hope will give us a certified supplier status. Our strategy in this segment relies on sched-uled deliveries to OEM customers as well as speedy and timely deliveries to machinery dealers of quanities dependent on their sales," Dekpol's CEO and owner Mariusz Tuchlin tells Poland Today. A further PLN 25m is to be used by Dekpol's property development division for site acquisitions. Last but not

least, Dekpol needs PLN 10m to carry out a residential project in Norway. "So far all of our developments have been based in Po-land, but we see the Norway project as an opportunity to expand into a market that offers much higher mar-gins. We estimate the Norwegian development to gen-erate combined revenues of PLN 130m from apart-ment sales, with total costs remaining in the region of PLN 90m. The investment is based on a 1.3ha site in Mandal, southern Norway, and will include apart-ments with a total floor space of 8,500 sq.m. After ob-taining a building permit we will set up a 50/50 joint SPV with a Norwegian partner. Dekpol will be the general contractor, while apartment sales will be han-dled by the Norwegian company. We are currently in the process of obtaining zoning and building permits, with groundbreaking expected in Q2 2015," says Mariusz Tuchlin.

Dekpol's key financials

0

50

100

150

200

2011 2012 2013

0

5

10

15

20

Revenues in PLNm, left axis

Net result in PLNm, right axis

Source: Dekpol

The IPO encompasses 2.3m new shares (representing 26.4% of the increased equity) as well as 0.65m shares currently belonging to CEO and key shareholder Mariusz Tuchlin (which will be subject to an 18-

month lock-up period). Although the maximum price has not yet been disclosed, analysts estimate the IPO's total gross value at some PLN 94m, putting Dekpol's market capitalization in the PLN 280m territory.

Dekpol is the general contractor of Galeria Neptun, a shopping center that will open next year in Starogard Gdański wit ha GLA of 24,000 sq.m. Image: Cushman & Wakefield

Last year Dekpol turned over PLN 194.5m (up from PLN 163m in 2012) and posted PLN 17.8m net profit (against PLN 3.3m in the previous year). Its 1H 2014 results came to PLN 98m (turnover) and PLN 4.8m (net earnings). General contracting services currently represent 80% of Dekpol's revenue. The largest con-tracts the company is involved in at the moment in-clude Galeria Neptun shopping center in Starogard Gdański as well as the Gdańsk Śródmieście railway station. "According to our assumptions, in a couple of years only around 50% of Dekpol's turnover will be generat-ed by general contracting services, with property de-velopment and production of steel assemblies and oth-er products each contributing the outstanding 25%," Mr. Tuchlin says.



Developer EuroDeveloper EuroDeveloper EuroDeveloper Euro----Styl Styl Styl Styl begins new office begins new office begins new office begins new office project in Gdańskproject in Gdańskproject in Gdańskproject in Gdańsk, , , , signs key lease in signs key lease in signs key lease in signs key lease in Gdynia Gdynia Gdynia Gdynia

Polish developer Euro-Styl, which has built a number of residential and office buildings in the Tricity area in recent years, is beginning another major investment in Gdańsk. The company seeks to redevelop the former Gdańsk shipyard offices on Marynarki Polskiej St. in Gdańsk, built in the 1970s, into a modern class A & B+ office building with a large warehouse area. The pro-ject is to be delivered in March 2016 under the "C200 Office" logo. The office building will comprise of 7 floors, and in-clude 17,500 sq.m of class A (ground floor and first floor), and B+ (the floors above) office space, an un-derground garage and 2,500 sq.m warehouse, as well as large surface parking nearby. According to JLL, which is the project's exclusive leasing agent, rents at C200 will be 10-20% lower when compared to typical office schemes that have been developed in the Tri-City area. "The differences between the upper and lower floors are almost negligible. The bottom floors are slightly higher and have a different layout, but we ensure A-level technical standard in the entire building. Gener-ally, the A-class floors are aimed at larger tenants and the upper ones - at smaller tenants," Euro-Styl's mar-keting director Bartosz Podgórczyk tells Poland To-day.

Besides attractive rents, the building's key asset is its location in the centre of Gdańsk near 169 Marynarki Polskiej Street (an extension of Jana z Kolna) and good transport links. There is a tram stop in front of the scheme’s entrance as well as an SKM Tricity commuter train stop – Gdańsk Politechnika. The in-vestment is just 3 kilometers from the city's key public transport hub – Gdańsk Główny station - that includes PKP, SKM, PKS as well as bus and tram stops.

C200's bottom two floors are aimed at larger ten-ants, while the upper floors offer smaller, B+ class of-fices . Image: Euro-Styl

Earlier this year, Euro-Styl broke ground on its first of-fice project in Gdynia. Located at 8 Łużycka St. the Tensor office park will include up to 20,000 sq.m of office space in three buildings, the first of which (4,960 sq.m) is to reach completion in 2H 2015. The three buildings will be accompanied by 446 parking spaces. "We are finishing up the underground section of the first building and we have just signed out first lease for Tensor [with Danish shipping giant Maersk; ed]. As a rule, when we introduce our projects to the market we clearly announce completion deadlines, which means

both Tensor and C200 are being developed on a specu-lative basis," says Bartosz Podgórczyk. To-date, the company has delivered two office pro-jects: Opera Office and BPH Office Park, completed during the 2011-2013 period with a combined GLA of 28,000 sq.m, which remain in Eury-Styl's portfolio as long-term investments. In the residential sector, it has so far completed apartments with a total floor area of more than 180,000 sq.m, with a further 38,500 sq.m under construction and 52,800 sq.m in projects that will be commenced this year."

Modern office stock in key cities* No. of assets Total area in sq.m

Warsaw 430 4,200,000

Kraków 102 628,000

Wrocław 100 551,000

Tri-City 80 455,000

Katowice 51 317,000

Poznań 55 303,000

Łódź 58 297,000

Source: CBRE *) as of June 2014

The Tricity area has emerged in recent years as one of Poland's hottest offshoring destinations and many de-velopers design their projects to match the expecta-tions of BPO/SSC tenants. As of end of Q3 2014, the of-fice space vacancy rate in Tricity stood at 13.1%. "The market is highly competitive but good projects - ones that are attractive in terms of design, location or price - are not vacant. Euro-Styl has a fully-leased portfolio of 30,000 sq.m and we are optimistic about C200 and Tensor," says Podgórczyk.


ONLINE MEDIA

Top Top Top Top Polish Polish Polish Polish portals portals portals portals boost user numbers boost user numbers boost user numbers boost user numbers through acquisitionsthrough acquisitionsthrough acquisitionsthrough acquisitions

Poland's online media sector has seen two large takeo-vers in recent weeks, with top Polish social network-ing site nk.pl and financial news website Money.pl getting new owners in the shape of rival internet por-tals, Onet.pl and wp.pl. Onet.pl, which itself was acquired by Ringier Axel Springer two years ago at PLN 1.3bn (PLN 956m for a 75% stake), purchased nk.pl for an undisclosed amount. Better known under its original name Nasza Klasa, a Polish clone of classmates.com, nk.pl used to be one of Poland's most popular websites, boasting more than 12m users as recently as 2010. Due to the rapid growth of Facebook, which has more than 17m users in Poland at the moment, nk.pl's popularity has since declined dramatically, down to 5.2m users as of September (a drop by 0.4m from the month prior). Although small, nk.pl's user pool includes proportion-ately more seniors and school-age kids than Facebook, which may be of value to some advertisers. A 70% stake in Nasza Klasa was sold by its original founders in 2008 to Estonian-Russian fund Forticom for an unconfirmed price of PLN 200m. According to estimates, Onet may have bought the business for less than a half of that amount. In 2013 nk.pl posted net earnings of PLN 4.9m on PLN 42m turnover. Onet said what attracted it in nk.pl was the site's online gaming potential. Onet currently runs three gaming sites (gry.onet, gryonline.onet oraz grydlaniej.onet), offering more than 100 games from

the world's top 30 game makers (including EA, Ubisoft, and Wargaming). "Online games and related content are highly sought after by Polish internet users. The acquisition of nk.pl is a great opportunity to expand our portfolio and take advantage of the site's current potential in terms of games and entertainment apps," commented Robert Bednarski, CEO of Grupa Onet.pl.

Top online publishers in Poland*

0 2 4 6 8 10 12 14 16 18 20 22

Po lskapresse

Wikipedia.org

Interia.pl

Gazeta.pl

WP

Allegro-GG

Onet-RASP

youtube.com

Facebook.com

Google

*) As of September 2014; data includes entire groups

Source: Megapanel PBI/Gemius

The price at which wp.pl or Wirtualna Polska, ac-quired 100% of the Money.pl Group from its founder Arkadiusz Owsiak and German fund Holtzbrinck Digi-tal also remains confidential. The group's key subsidi-ary Money.pl, which operates nine domains including the popular business news portal Money.pl, turned over PLN 20.3m and posted a PLN 2.3m net loss in 2013. According to data from Gemius, Money.pl is Po-land's 4th most popular online service in the business, finance and law category. However, the group owns also a number of subsidiaries, including Business Ad Network, Businessclick, Favore and Legalsupport as well as legal portal e-prawnik.pl and home improve-

ment services platform favore.pl. Overall, the group's many websites get 3.7m visitors a year.

Internet is 2nd key advertising medium Poland's advertising market Q1-Q3 2014; in PLNbn

0 1 1 2 2 3 3

Cinemas

Newspapers

Magazines

Outdoor

Radio

Internet

TV

Source: Starlink

"Our ambition and strategic goal was investing in high-quality, opinion-forming content. Adding a brand as well known as Money.pl to our portfolio is a natural consequence of this strategy. Our business team is gaining a team of well-known journalists and experts in areas that include capital markets, economic re-ports, financial anaylytics and law," says Jacek Świderski, CEO of Grupa Wirtualna Polska, created from the merger of the Wirtualna Polska and o2 por-tals, with financial backing from the private equity fund Innova Capital. Innova and o2 acquired wp.pl from the France Telecom-controlled TPSA group for PLN 375m. Despite all the talk about quality content, the bottom line for the largest portals are user numbers, which translate into their position in the monthly Gemius Megapanel ranking and consequently - their value for advertisers. Onet has long been the domestic leader of this raking and prior to the nk.pl takeover the group had 15.5m visitors, reaching 71.5% of Polish internet


users. Although the number two spot belongs to the online marketplace Allegro and its internet commu-nicator Gadu-Gadu, Onet's true competitor is wp.pl, ranked as number three with 14.75m users and a cov-erage of 67.8%. As part of their rivalry, Earlier this year Onet.pl bought price comparison websites Skapiec.pl and Opineo.pl, while WP.pl snatched up thematic portals SportoweFakty.pl, Domodi.pl and Homebook.pl. Rumors have it that South African Naspers, owner of Poland's immensely popular e-commerce site Allegro may is seeking buyers for the communicator Gadu-Gadu. Similar to nk.pl's the lat-ter's best days are long gone, but it has some value as a gaming platform.

TRANSPORT & LOGISTICS

PKP Cargo to downsize PKP Cargo to downsize PKP Cargo to downsize PKP Cargo to downsize 1,300 staff through 1,300 staff through 1,300 staff through 1,300 staff through voluntary leavesvoluntary leavesvoluntary leavesvoluntary leaves

Poland's leading railway freight company PKP Cargo has obtained all necessary corporate clearances to ini-tiate a voluntary leave program that aims at reducing employee numbers at the parent company as well as its subsidiary PKP Cargotabor by 1,300 positions. The to-tal cost of the program is being estimated at PLN 87m, as the most experienced employees may count on sev-erance payouts equivalent to as many as 36 monthly salaries. PKP Cargo has to offer such generous perks because 95% of its staff are covered by employment guarantees that make regular redundancies impossi-ble. Although costly, the staff reductions should not put much strain of PKP Cargo's budget, as the company's financial position has been very good recently and it is currently mulling several acquisitions.

"We are sitting on some PLN 800m of cash, which we intend to put to good use by acquiring domestic and foreign businesses that complement PKP Cargo. We are currently in talks on a number of acquisitions, in-cluding CTL Logistics and Pol-Miedź Trans in Po-land and the Advanced World Transport B.V., which operates primarily in the Czech Republic," PKP Cargo's CEO Adam Purwin told Poland Today in a re-cent interview. The company is hoping to seal its first deals in the coming months.

Poland's top rail freight operators Share in total cargo transported by rail in Jan-Oct 2014

Other

19%

PKP LHS

5%

Lotos Kolej

5%

CTL

6%

PKP Cargo

48%

DB Schenker

Rail

19%

Source: UTK

PKP Cargo is the European Union’s second largest railway freight company after Deutsche Bahn AG and the first publicly listed one, following its recent IPO on the Warsaw Stock Exchange. The state-owned railway group PKP currently holds a 33% stake in the compa-ny, which carried around 114m tons of freight last year, mainly hard coal and building materials. PKP Cargo saw its revenues top PLN 4.72bn in 2013, down from PLN 5.16bn in 2012, while its net earnings slumped to PLN 74m from PLN 268m, due to economic slowdown and over PLN 200m worth one-off privatization bo-nus.

The company has emerged from the brink of bank-ruptcy caused by the economic crisis at the end of the last decade. In 2008 and 2009 it posted net losses of PLN 179m and PLN 498m, which prompted an in-depth restructuring that saw some 20,000 positions cut, and many redundant side businesses and regional units closed down. The overhaul proved effective as the business is back in the black and expanding abroad. PKP Cargo has obtained licenses to inde-pendently operate in Austria, Belgium, the Czech Re-public, Germany, Hungary, Lithuania, the Netherlands and Slovakia. Warsaw-based PKP Cargo had a 60.3% share in the Polish market in 2012 and controlled 8.5% of total rail freight in the EU. That compares with DB Schenker’s 28% and 5.4% shares in the EU and Poland, respec-tively. In the first ten months of 2014 PKP Cargo had a 47.8% share in the total amount of cargo transported in Poland by rail, followed by DB Schenker Rail Polska with 18.5%.

RETAIL

New grocery chain to New grocery chain to New grocery chain to New grocery chain to launch in January with launch in January with launch in January with launch in January with 170 outlets170 outlets170 outlets170 outlets

Polish company market-Detal will launch a brand new grocery chain from January 2015, starting with 170 locations across the country and 5,500 employees. After launching the initial 170 outlets, the new chain is to grow at the rate of 30 new locations per annum. Be-sides organic growth, the company may also consider acquisitions to speed up expansion. Established in 1997, market-Detal has been one of the driving forces behind the POLOmarket supermarket


chain, which currently includes some 420 locations across the country. market-Detal's CEO Artur Kasner, POLOmarket's co-founder, has decided to create his own retail concept Mila, focused on fresh grocery products, and conveinence. Consequently, some 40% of the former POLOmarket outlets (170 stores) are be-ing currently rebranded to launch in January under the Mila logo, forming the core of the new chain. "We clearly see the need for a nre retail concept that would combine the advantages of a traditional grocery store with those of a discount supermarket. We have defined the categories that have been the most im-portant for our clients, including fresh fruit and veg, meat and cold cuts, and baked goods, in which we will continue to specialize," Kasner says.

According to warehouse giant Goodman, which de-veloped the facility in less than 7 months, the biggest challenge on the part of the builders was to adapt the building to the needs of large-scale food storage operations. Specifically, 40% of warehouse space will be cooled to between 0 °C and 8 °C and a separate 1,100 sq.m freezer provides storage at a constant temperature of -24 °C.. Image: Goodman

The chain's expansion will be supported by a custom-built logistics centre in Krągola near Konin, which was delivered last month by industrial property developer

Goodman. The distribution centre comprises 38,100 sq.m of warehouse space and 1,600 sq.m of office space. The building has an internal height of 10.8 me-tres and 28,000 pallet spaces for market-Detal’s spe-cific storage needs. The logistics centre will feature 84 docks and an additional access road to facilitate the ef-ficient movement of goods. market-Detal plans to hire 400 people to fill various positions at the facility. The new distribution centre for market-Detal will be situated in Krągola, 11km from the centre of Konin. Its location, with direct access to the A2 motorway and several national roads, provides the site with ideal road transport connections to Poland’s most important commercial markets.

RETAIL PROPERTIES

Rank Progress opens Rank Progress opens Rank Progress opens Rank Progress opens rrrretail parketail parketail parketail park in in in in KKKKrosnorosnorosnorosno, , , , ggggets permit ets permit ets permit ets permit fffforororor MielecMielecMielecMielec

Warsaw-listed property developer Rank Progress opened its project, Miejsce Piastowe retail park near Krosno, south-east of Poland, and obtained a buiulding permit for Galeria Aviator shopping center in Mielec. Both investments are part of the company's ambitious development pipeline that focuses on neighborhood shopping centers in smaller towns (below 50,000 in-habitants). Built in little more than half a year by general contrac-tor AMB Group Polska, Miejsce Piastowe opened on 28 November with 4,700 sq.m of lettable space and 230 parking spaces. Its key ternants include food dis-counter Biedronka, electricals retailer Media Expert, as well as Martes Sport and Centrum Chińskie.

With a GLA of 26,000 sq.m and 1,100 parking spaces, the planned Galeria Aviator will be the largest shop-ping and entertainment center in Mielec and the re-gion. Besides H&M, Briju, CCC, Deichmann, Martes Sport, Rossmann, Pepco, supermarket and home im-provement anchors, and a number of other outlets, the project will house the first multi-screen cinema in the region. "We are currently in the process of selecting a general contractor for Galeria Aviator, after which we wil be able to publish a detailed timeline of the project," says Łukasz Gruszczyński, marketing director at Rank Pro-gress.

Rank Progress is currently seeking a general contrac-tor for Galeria Aviator in Mielec. Image: Rank Progress

Based in Legnica, Rank Progress had long specialized in development of shopping centers for international retail chains, such as Tesco, Carrefour, Castorama, Leroy Merlin, or Jeronimo Martins. The company also carried out a number of highly-profitable short-term projects that typically encompassed site acquisition, permitting, and design, and eventually sale to re-nowned domestic and foreign buyers. However, in the past couple of years their key focus have been large


shopping centers and retail parks in medium-sized cit-ies.

Targeting medium-sized towns Rank Progress and its retail center projects

City Name GLA sq.m Opening

Completed

Legnica Galeria Piastów 15,600 2006

Kłodzko* Galeria Twierdza 31,000 2009 Zgorzelec* Park Handlowy Eden 8,500 2008 Jelenia Góra Pasaż Grodzki 10,500 2010 Kalisz* Galeria Tęcza 16,000 2011 Zamość* Galeria Twierdza 24,000 2011

Świdnica Galeria Świdnicka 15,600 2012 Grudziądz Pasaż Wiślany 5,400 Q2 2013

Chojnice Brama Pomorza 25,600 Q4 2013

Oleśnica Pogodne Centrum 7,700 Q2 2014

Piła* Galeria Piła 28,750 Q4 2014

Krosno Miejsce Piastowe 5,600 Q4 2014

Planned

Olsztyn CH Jaroty 30,000 TBA Kielce Regional Center S7 97,800 TBA Warsaw/Duchnów Warszawa Wschód 62,300 TBA Mielec Galeria Aviator 26,000 TBA

Wejherowo n/a 18,200 TBA

Source: Rank Progress *) sold

Since 2001 Rank Progress has completed 52 invest-ments, including 13 proprietary shopping centers, lo-cated in Legnica, Jelenia Góra, Świdnica, Zgorzelec, Kłodzko, Zamość, Kalisz (the latter three were sold to Blackstone Real Estate), as well as Grudziądz, Chojnice (which opened last year), Oleśnica, Krosno and Piła (delivered in 2014). With a GLA of 23,800 sq.m, the Piła project has been sold to Austrian prop-erty giant Immofinanz for PLN 58m net. Back in mid-2011 Rank Progress has announced plans to build 16 new retail centers at the cost of PLN 2.2bn over the 2011-14 period. The company is currently working on a retail center in Mielec, and its future pipeline includes also schemes in Olsztyn, Kołobrzeg,

Kielce, Duchnów near Warsaw, Kielce and Wejherowo. Overall, by 2015 the company plans to launch 10 shopping centers with a total floor space of 340,000 sq.m. and a GLA of 275,000 sq.m. Rank Progress posted a PLN 11m net loss on continued operations last year against a PLN 23.7m profit in 2013. As of end of December its total assets were worth close to PLN 1.02bn, up from PLN 859m a year earlier.

POLITICS & ECONOMY

Manufacturing PMI Manufacturing PMI Manufacturing PMI Manufacturing PMI shoots up in Novembershoots up in Novembershoots up in Novembershoots up in November

Poland's purchasing managers' index PMI, a gauge of manufacturing, increased to 53.2 points in November, from 51.2 in October rising well above the 50 points level separating growth from contraction, a report by HSBC and Markit showed. The PMI rose for the third month running, signalling a robust overall improve-ment in manufacturing business conditions in Poland, and a turnaround from August’s 15-month low of 49.0 points, the report's authors said. "The November manufacturing PMI surprised with a second consecutive strong reading. The survey showed improving business conditions in the manu-facturing sector at the fastest rate since March this year. The strong November reading also cements the return of the PMI index above the 50 points threshold compared to the contraction through Q3 2014," com-mented Agata Urbańska-Giner, Economist, Central & Eastern Europe, at HSBC. Crucially, all five components of the indicator made a positive contribution to the headline figure, the first such homogeneous move since December 2010, ana-

lysts said. New orders rose for the second straight month, accelerating to the fastest rate since March, boosted by new export business, up for the first time in seven months. "A number of firms reported successful entry into new markets, including other Central and Eastern Europe-an economies. Input prices rose at an increasing rate in November but the output prices continued falling and at a faster pace in November than in October," Urbańska-Giner added.

Purchasing Managers' Index (PMI) The 50 mark separates growth from contraction

45

50

55

60

Sep 13 Nov 13 Jan 14 Mar 14 May 14 Jul 14 Sep 14 Nov 14

Source: Markit & HSBC

Growing new orders led to a further increase in pro-duction, also at the fastest pace since March, albeit not fast enough to keep pace with orders and backlogs grew, Markit wrote. Also on the rise in November: hir-ing, to keep pace with production demands and input purchases, the first such gain since April and leading to the first rise in input stocks since March 2012. "We are cautiously optimistic and expect GDP growth to consolidate at 3%+ y/y in the coming quarters leav-ing Polish interest rates on hold," Ms. Urbańska-Giner concluded.


POLITICS & ECONOMY

Poland moves up Poland moves up Poland moves up Poland moves up tttthree hree hree hree sssspotspotspotspots inininin Transparency Transparency Transparency Transparency International's International's International's International's CCCCorruption orruption orruption orruption PPPPerceptions erceptions erceptions erceptions IIIIndexndexndexndex

Poland moved up three places to number 35 in Trans-parency International's 2014 Corruption Perceptions Index (CPI), which ranked 175 countries and territo-ries based on how corrupt their administrative and po-litical institutions are perceived to be on a scale from 0 (highly corrupt) to 100 (very clean). The country scored 61 points, ranking way ahead of its regional peers such as Hungary (47th place), Czech Republic (53) and Slovakia (54). Compiled from a combination of surveys and assess-ments of "the abuse of entrusted power for private gain," the CPI is the most widely used indicator of cor-ruption worldwide. The lowest ranked countries are perceived as "plagued by poor governance, and un-trustworthy and badly functioning public institutions like police or media, whereas the top performers are found to have "high levels of press freedom, open budget processes, and strong accountability mecha-nisms." More than two-thirds of the 175 countries in the 2014 index score below 50. The average country score this year is 43/100. Seychelles, Malta, Latvia, and South Korea are listed at 43. The four least corrupt countries are Denmark (92), New Zealand (91), Finland (89), and Sweden (87), while the US came in 17th — along with Barbados, Hong Kong, and Ireland — with a rating of 74.

Corruption in Poland is lower than in most of its CEE neigbours, according to Transparency International's 2014 Corruption Perceptions Index (darker colors in-dicate higher levels of perceived corruption). Image: Transparency Internatioinal

In the CEE region only the tiny Baltic state of Estonia (ranked at number 26) beat Poland in this year's edi-tion of CPI report. Poland's eastern neighbor Ukraine, which is fighting a Russian-backed separatist rebel-lion, came in 142nd with a score of 26. Russia's score is 27.

PPPPoland Today Eventsoland Today Eventsoland Today Eventsoland Today Events

For more information about Poland Today events, please visit: www.poland-today.pl/events To sponsor or attend any of Poland Today events, please call Magdalena Gawlikowska on +48 602-223-634 or e-mail [email protected]

Upcoming events:Upcoming events:Upcoming events:Upcoming events:

January 14 (NEW DATE!) Sala Sesyjna, Town Hall, ul. Sukiennice 9 Wrocław

PRIMETIME WROCŁAW Poland’s entrepreneurial capital? Wrocław, under open and steady political leadership, has blazed a business trail in Poland. But with others catching up fast, can the city maintain its entrepre-neurial edge? The event will include a special "Fireside Chat" with Wrocław Mayor Rafał Dutkiewicz, in which he will discuss the city's rising expectations and the chal-lenges it faces Ryszard Petru, president of the Asso-ciation of Polish Economists. Panel discussion topics will include innovation, sus-tainability, as well as cooperation between business and education. Speakers include: - Krzysztof Sachs, Partner, Director of Wrocław Re-gion, EY - Tomasz Gondek, Director, EIT+ - Karol Patynowski, Associate Director, Tenant Rep-resentation, JLL - Marcin Kozłowski, Global Manager, AIP Business Link - Jarosław Prawicki, Head of Sales & Marketing, UBM Polska There will also be an "Open Forum" where partici-pants will have the opportunity to discuss other is-sues, as well as a "speed dating" session. Partnership opportunities still available!


OPINION

The Canadian The Canadian The Canadian The Canadian initiative: connect initiative: connect initiative: connect initiative: connect to innovateto innovateto innovateto innovate

by Poland Today Editor Andrew Kureth

In Poland, ‘innovation’ has been the buzzword of 2014. “If I hear the word innovation again, I’m going to be sick,” a contact told me earlier this year. For fear of contaminating my food, I didn’t mention it again, but I understood her view. Just about everybody seems to be jumping on the innovation bandwagon, whether they understand what it means or not. Nevertheless, we at Poland Today have focused a great deal on it, and for good reason. The country’s economy cannot continue to grow with the model it has used thus far: low-cost labour, simple manufacturing, par-roting Western processes and a flood of EU funds. Sooner or later, the benefits of all of those things will end – and they will never get Poles to Western Euro-pean living standards. That will require higher wages. To obtain them, Po-land will have to grow high-tech industries, build global brands and develop its entrepreneurial ecosys-tem. In other words, Poles will have to innovate.

Those things are already happening to a certain de-gree, thanks in large part to the hullabaloo around in-novation. Polish companies and local authorities may not have thought about innovation before, but all of them are thinking about it now. The government is en-couraging high-tech investment, Polish brands are ex-panding abroad, and its startup scene is exploding: witness StartUp Hub Poland, which launched last week. It aims to bring startups from around the region, especially from countries where there is little support for entrepreneurship, to Poland and match them with the funding and expertise they need to succeed. For more on that business, check out the next issue of Po-land Today magazine, due out in February. Still, more needs to be done, especially when it comes to know-how. Reams have been written about Po-land’s entrepreneurial spirit, and there is no lack of ambitious young businesspeople with clever ideas for new products and services here. But often they don’t have the business skills or the experience to move their ideas forward. This is especially true for highly innovative sectors like biotechnology, where there are precious few resources for guiding businesses through the regulatory hoops they encounter when developing, testing and marketing their products. That’s why it is so encouraging to see the initiative be-ing put forward by the Canadian embassy here in Po-land. The Canadians have made it their focus to rein-force business ties between their country and Poland through cooperation in innovation. In short, the Cana-dians want to bring their experience to bear in boost-ing Poland’s innovative businesses. One element of this project was to bring members of the Polish and Canadian innovation communities to-gether during Canadian Governor-General David Johnston’s visit to Poland in October. That meeting has already yielded some initial results. In late No-vember one attendee, a Polish venture capitalist with a

backlog of projects, was so inspired by what he heard that he took time out of the US-Poland Innovation Week in California to fly to Toronto. He found the Ca-nadians much more receptive than the Americans. “In Silicon Valley, there are too many projects, it’s like every kid in the classroom is screaming for attention. In Canada, their pipeline of projects isn’t so full, so it’s easier to find people willing to cooperate,” he told me. On November 28 I had the pleasure of enjoying lunch with some Polish innovators at the Canadian Ambas-sador’s residence here in Warsaw. Ambassador Alex-andra Bugailiskis made it clear from the beginning that she was there to listen. What more could she and her colleagues at the embassy do to help engage Polish and Canadian innovators? Many ideas were discussed but the common theme was this: the embassy should con-tinue to provide platforms to make it easier for innova-tors in the two countries to connect and work to-gether. The businesspeople would do the rest. It really is as simple as that. The ideas are there. So is the money. But what Poland’s innovation ‘ecosystem’ really needs is experience, know-how, and a gateway to markets outside of Europe. Canada stands ready to provide those, and I’m sure both countries will benefit. For our part, Poland Today will publish a ‘Canada in Focus’ supplement in our upcoming issue. Innovation will be a key topic. However, we hope that more coun-tries will follow Canada’s lead. People in Poland may be tiring of hearing about innovation, but that’s a small price to pay for benefits that will last generations.


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 Jun '14 Jul '14 Aug '14 Sep '14 Oct '14

m/m (%) -1.1 +4.7 -1.1 -0.9 +4.2

y/y (%) +1.2 +2.1 +1.7 +1.6 +2.3

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 670.3 692.7 723.0 713.1 694.0 709.7 +0.3

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% 426.836 n/a

Q2 2014 +3.5% 418,317 -1.2%

Q1 2014 +3.4% 403,121 -1.2%

Q4 2013 +3.0% 463,855 -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

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

Sector Q4 2013 Q1 2014 Q2 2014 Q3 2014

A B A B A B A B

Coal mining 8,615 196 6,333 144 6,382 145 6,044 137

Manufacturing 3,690 161 3,663 160 3,743 163 3,747 164

Energy 6,736 205 6,358 193 6,020 183 6,392 194

Construction 3,895 166 3,706 158 3,884 166 3,872 165

Retail & repairs 3,456 147 3,544 151 3,577 153 3,532 151

Transportation 3,913 138 3,666 130 3,650 129 3,710 131

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

Financial sector 6,602 148 6,747 152 6,738 151 6,360 143

National average 3,823 152 3,895 155 3,740 149 3,781 154


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

Feb 12

May 12

Aug 12

Nov 12

Feb 13

May 13

Aug 13

Nov 13

Feb 14

May 14

Aug 14

Nov 14

60

80

100

120 Consumer confidence (le ft 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 OuIndustrial OuIndustrial OuIndustrial Outputtputtputtput

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-Sep

2014 y/y (%)

share (%)

2013 share (%)

Jan-Sep 2014

y/y (%)

share (%)

2013 share (%)

Food and live animals 54,009 +4.3 10.7 69,304 10.9 36,296 +3.9 7.2 47,906 7.4

Beverages and tobacco 7,729 +19.9 1.5 8,624 1.4 3,158 +5.8 0.6 4,150 0.6

Crude materials except fuels 12,459 +2.1 2.5 15,744 2.5 16,368 +07 3.2 21,585 3.3

Fuels etc 21,003 -6.1 4.2 30,013 4.7 55,523 -0.5 11.0 75,539 11.7

Animal and vegetable oils 1,471 +4.7 0.3 1,864 0.2 1,985 -0.6 0.4 2,646 0.4

Chemical products 46,392 +4.3 9.2 59,103 9.3 75,454 +6.7 14.9 92,917 14.3

Manufactured goods by material 101,308 +2.8 20.1 129,915 20.3 90,508 +6.9 17.8 112,392 17.3

Machinery, transport equip. 190,119 +5.1 37.8 239,434 37.5 167,104 +4.0 32.9 216,608 33.4

Other manufactured articles 68,030 +10.3 13.5 82,816 13.0 51,133 +16.6 10.1 58,210 9.0

Not classified 678 n/a 0.2 1,782 0.2 9,714 n/a 1.9 16,242 2.6

TOTAL 503.198 +4.6 100 638,599 100 507,243 +4.8 100 648,195 100

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 5 December 2014

100 USD 336.19 ↑

100 EUR 415.85 ↓

100 GBP 526.93 ↓

100 CHF 345.89 ↓

100 DKK 55.89 ↓

100 SEK 44.78 ↓

100 NOK 47.29 ↓

10,000 JPY 279.38 ↓

100 CZK 15.06 ↓

10,000 HUF 135.41 ↓

100 USD/EUR against PLN

300

350

400

450

23 D

ec 13

5 M

ar 14

14 M

ay 14

22 Jul 14

29 Sep 14

5 D

ec 14

USD EUR

MMMMoney Supplyoney Supplyoney Supplyoney Supply

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

Monetary base 164,008 167,008 166,104 171,649

M1 570,507 574,529 578,485 574,606

- Currency outside banks 122,209 124,986 124,389 125,902

M2 985,769 1,003,128 1,003,354 1,011,930

- Time deposits 415,261 428,597 424,867 437.323

M3 1,002,137 1,020,561 1,021,824 1028,665

- Net foreign assets 301,207 304,359 310,172 311,298 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 Jul' 14 Aug' 14 Sep' 14 Oct' 14

Loans to customers 939,641 950,774 954,978 958,641

- to private companies 274,549 277,482 280,248 279,124

- to households 581,447 587,136 590,208 592,068

Total assets of banks 1,678,129 1,718,251 1,737,728 1,742,288

Source: Central Bank NBP

IIIInterest ratesnterest ratesnterest ratesnterest rates

Average weighted annual interest rates

on loans to non-financial corporations

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

PLN (up to 1 year) 4.4% 4.5% 4.4% 4.4% 4.4% 4.1%

PLN (up to 5 y ) 4.8% 4.8% 4.7% 4.8% 4.7% 4.5%

PLN (over 5 y) 4.7% 4.7% 4.7% 4.7% 4.7% 4.5%

PLN (total) 4.7% 4.7% 4.7% 4.7% 4.7% 4.4%

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

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

Warsaw Inter Bank Offered Rate (WIBOR) as of 5 Dec 2014

Overnight 1 week 1 month 3 months 6 months

2.11% 2.10% 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 5 Dec

'14

Change 28 Nov

'14

Change end of

'13

↑ Alior Bank 81.9 +4% +1%

→ Asseco Pol. 53.64 0% +17%

↓ Bogdanka 107.5 -2% -15%

↓ BZ WBK 388.7 -1% 0%

↑ Eurocash 41 +10% -14%

→ Grupa Lotos 27.05 0% -24%

↓ JSW 20.12 -4% -62%

↑ Kernel 30.3 +4% -20%

↓ KGHM 117.3 -5% -1%

→ LPP 8,830 0% -2%

→ mBank 503.9 0% +1%

↓ Orange Pol. 9.34 -2% -5%

↑ Pekao 188.95 +2% +5%

↑ PGE 20 +3% +23%

↓ PGNiG 4.8 -1% -7%

↑ PKN Orlen 49.05 +9% +20%

→ PKO BP 37.7 0% -4%

→ PZU 479 0% +7%

↑ Synthos 4.19 +1% -23%

↑ Tauron 5.30 +2% +21%

Source: Warsaw Stock Exchange

Key indices

as of 5 December 2014

WIG Total index

55553333,,,,652652652652....58585858 Change 1 week +1% ↑

Change end of '13 +5% ↑

WIG-20 blue chip index

2,2,2,2,444438383838....42424242 Change 1 week +1% ↑

Change end of ' +2% ↑

WIG Total closing index

last three months

52,000

53,000

54,000

55,000

56,000

5 Sep 14

29 Sep 14

21 Oct 14

13 N

ov 14

5 D

ec 14


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

office: +48 22 412 41 69

mobile: +48 607 079 547

[email protected]

Business Review+ Subscription

1 year (52 issues)-

EUR 690 (PLN 2760) + 23% VAT

6 months (26 issues)-

EUR 375 (PLN 1480) + 23% VAT

3 months (13 issues)-

EUR 245 (PLN 980) + 23% VAT

Sales Director

James Anderson-Hanney

mobile: +48 881 650 600

james.anderson-hanney@poland-

today.pl

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-Oct 2014 *

Monthly wages (PLN)

Jan-Oct 2014**

Unemploy-ment

Oct 2014

New dwellings Jan-Oct 2014

Indus-

try

Constru-

ction

Indus-

try

Constru-

ction

in '000 % Num-

ber

Index *

Dolnośląskie (Wrocław) 102.6 109.3 4,367 4,219 121.6 10.6 11,000 81.1

Kujawsko-Pomorskie (Bydgoszcz) 104.4 99.2 3,462 3,343 123.1 15.3 5,046 99.0

Lubelskie (Lublin) 101.7 84.2 3,756 3,135 111.9 12.2 4,534 86.8

Lubuskie (Zielona Góra) 115.9 105.3 3,492 3,099 46.3 12.6 2,432 93.6

Łódzkie (Łódź) 100.9 110.2 3,736 3,336 124.4 11.8 5,226 101.8

Małopolskie (Kraków) 100.4 101.0 3,846 3,415 134.8 9.6 12,466 101.5

Mazowieckie (Warszawa) 100.1 110.3 4,630 5,081 248.6 9.8 25,056 107.6

Opolskie (Opole) 105.7 122.4 3,662 3,597 41.3 11.7 1,636 113.1

Podkarpackie (Rzeszów) 100.9 107.6 3,437 3,131 131.7 14.2 5,163 105.2

Podlaskie (Białystok) 106.8 114.9 3,341 3,937 58.9 12.8 3,454 112.9

Pomorskie (Gdańsk-Gdynia) 109.2 116.4 4,048 3,498 94.3 11.1 7,982 81.2

Śląskie (Katowice) 100.6 105.9 4,580 3,575 174.9 9.6 8,209 93.3

Świętokrzyskie (Kielce) 107.3 101.2 3,453 3,362 73.8 13.9 2,693 123.8

Warmińsko-Mazurskie (Olsztyn) 104.6 109.1 3,307 3,213 93.3 18.1 3,608 108.5

Wielkopolskie (Poznań) 106.2 102.2 3,771 3,829 115.3 7.7 11,136 99.4

Zachodniopomorskie (Szczecin) 103.5 100.0 3,569 3,506 90.6 15.1 4,594 100.0

National average 103.3 106.7 4,021 3,859 1,784.8 11.3 114,235 98.0

*) 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. 64