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No. 006 / 7th October 2013 / www.poland-today.pl / magazine, conferences, portal, newsletter 1 year subscription: EUR 690 (PLN 2760) Newsletter Editor: Lech Kaczanowski [email protected]tel. +48 607 079 547 Sales Contact: James Anderson-Hanney [email protected]tel. +48 881 650 600 MANUFACTURING & PROCESSING Germany's MTU Aero Engines breaks ground on EUR 40m project page 2 BANKING & FINANCE Poland's second largest bank Pekao bids on Rabobank subsidiary BGŻ page 3 ENERGY & RESOURCES Warsaw heat & power producers moving towards natural gas page 4 PROPERTY & CONSTRUCTION Skanska sells Wroclaw project, signs key tenant for Atrium 1 in Warsaw page 6 Echo Investment picks contractor for PLN 500m office tower in Warsaw page 7 SERVICES & BPO IBM names location of giant IT center in Katowice page 8 Warsaw-listed Orbis expands Mercure chain in Latvia & Poland page 9 TRANSPORT & LOGISTICS Mid Europa Partners add 2nd ski lift operator to their Polish portfolio page 11 CONSUMER GOODS & RETAIL Żabka acquires three local retail chains, adds PLN 200m to turnover page 12 FOOD & AGRICULTURE Kompania Piwowarska to invest PLN 100m in Poznań brewery page 13 PE fund Bridgepoint seals 2nd deal in Poland, buys private label biscuit maker Dr Gerard page 14 POLITICS & ECONOMY Q3 PMI at highest level in more than two years, labor market picking up page 15 KEY FIGURES Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 16-18 Amazon seeks to establish two centers near Wroclaw and one near Poznań. Photo: Amazon Amazon moving logistics to Poland Amazon moving logistics to Poland Amazon moving logistics to Poland Amazon moving logistics to Poland E-commerce mogul Amazon is reportedly gearing up to relocate a bulk of its logistics operations in continental Europe from Germany to Poland and the Czech Republic. In Poland alone the project may create up to 15,000 jobs in peak seasons. page 10 PHN picks Hochtief for flagship project PHN picks Hochtief for flagship project PHN picks Hochtief for flagship project PHN picks Hochtief for flagship project State-controlled property group PHN has teamed up with Germany's Hochtief to develop a 45,000 sq.m office skyscraper near Warsaw's Rondo ONZ. page 5
MANUFACTURING & PROCESSING Germany's MTU Aero Engines breaks ground on EUR 40m project page 2
BANKING & FINANCE
Poland's second largest bank Pekao bids on Rabobank subsidiary BGŻ page 3
ENERGY & RESOURCES
Warsaw heat & power producers moving towards natural gas page 4
PROPERTY & CONSTRUCTION
Skanska sells Wrocław project, signs key tenant for Atrium 1 in Warsaw page 6
Echo Investment picks contractor for PLN 500m office tower in Warsaw page 7
SERVICES & BPO
IBM names location of giant IT center in Katowice page 8
Warsaw-listed Orbis expands Mercure chain in Latvia & Poland page 9
TRANSPORT & LOGISTICS
Mid Europa Partners add 2nd ski lift operator to their Polish portfolio page 11
CONSUMER GOODS & RETAIL Żabka acquires three local retail chains, adds PLN 200m to turnover page 12
FOOD & AGRICULTURE
Kompania Piwowarska to invest PLN 100m in Poznań brewery page 13 PE fund Bridgepoint seals 2nd deal in Poland, buys private label biscuit maker Dr Gerard page 14
POLITICS & ECONOMY
Q3 PMI at highest level in more than two years, labor market picking up page 15
KEY FIGURES
Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 16-18
Amazon seeks to establish two centers near Wrocław and one near Poznań. Photo: Amazon
Amazon moving logistics to PolandAmazon moving logistics to PolandAmazon moving logistics to PolandAmazon moving logistics to Poland E-commerce mogul Amazon is reportedly gearing up to relocate a bulk of its logistics operations in continental Europe from Germany to Poland and the Czech Republic. In Poland alone the project may create up to 15,000 jobs in peak seasons. page 10
PHN picks Hochtief for flagship project PHN picks Hochtief for flagship project PHN picks Hochtief for flagship project PHN picks Hochtief for flagship project State-controlled property group PHN has teamed up with Germany's Hochtief to develop a 45,000 sq.m office skyscraper near Warsaw's Rondo ONZ. page 5
Germany's MTU Aero Germany's MTU Aero Germany's MTU Aero Germany's MTU Aero Engines breaks ground Engines breaks ground Engines breaks ground Engines breaks ground on EUR 40m projecton EUR 40m projecton EUR 40m projecton EUR 40m project
MTU Aero Engines AG, Germany's leading engine manufacturer has just broken ground on a major ex-tension of its Polish production unit in Rzeszów. At the cost of EUR 40m MTU is adding a brand new 9,200 sq.m building to the existing factory, expanding its floor area by approximately 50%. "Our Rzeszów subsidiary MTU Aero Engines Polska currently has a workforce of about 500 employees and with the new investment we seek to increase that number by a further 250 staff by 2020," MTU's Mela-nie Wolf tells Poland Today. At its high-tech factory in Rzeszów, MTU manufac-tures engine components, such as turbine airfoils, for the PW1000G family of geared turbofan engines and performs preparatory work. Furthermore, the German engine manufacturer is concentrating its module as-sembly activities for a variety of its commercial pro-grams in Rzeszów. Another of the shop’s areas of ex-pertise is the repair of engine parts, for example tubes. As far as research and development is concerned, MTU Aero Engines Polska's focus is on uncooled air-foils, fixture design, and software. "The expansion of our Polish affiliate is part of MTU’s investment and growth strategy, very much in the same way as the new blisk production shop we built in Munich and the logistics center we set up in Hanno-ver. With this move, we lay the foundation for the growing production and volume ramp-up for the
geared turbofan programs," explains Egon Behle, CEO of MTU Aero Engines AG.
MTU Aero Engines provides also service and maintenance of aircraft engines. Photo: MTU MTU Aero Engines Polska was set up on a 7ha stretch of land near Rzeszów Airport in 2009. It is located in the so-called Aviation Valley and belongs to a special economic zone. Construction work on the new build-ing has commenced this fall and production is ex-pected to be up and running in late 2014 and to reach full capacity by 2017. The expansion of the Rzeszów-based facility will not affect the headcount at MTU's German companies, the company said, but cover the requirements for the production ramp-up in several of its commercial engine programs, for instance the V2500 for the Airbus 320, which have so far been car-ried out in rented buildings. Moreover, there are plans to step up the low-pressure turbine assembly activities and concentrate them in Rzeszów, and to beef up re-search and development at the Polish plant. "Currently we have some 100 R&D engineers at MTU Aero Engines Polska, and we plan to increase their number by another 50, following the extension," says Agnieszka Adamczyk of MTU Aero Engines Polska. The Munich-based MTU Aero Engines develops and produces commercial and military aircraft engines and
industrial gas turbines. The company is a technological leader in low-pressure turbines, high-pressure com-pressors, manufacturing processes, and repair tech-niques. MTU Aero Engines is Germany's industrial lead company for practically all engines flown by the country's military. In the commercial maintenance ar-ea, MTU Maintenance is the world's largest independ-ent provider of engine maintenance services. In fiscal 2012, the company had a workforce of some 8,500 em-ployees and posted consolidated sales of some EUR 3.4bn.
MANUFACTURING & PROCESSING
PoPoPoPolish candle producer lish candle producer lish candle producer lish candle producer to open factory in USA to open factory in USA to open factory in USA to open factory in USA
Polish Korona SA, one of the world's largest produc-ers of candles, is embarking on its first foreign invest-ment in a rather unexpected destination: the United States. At the cost of USD 18.3m Korona will launch production of candles in Pulaski County, Virginia. As part of the investment, the Polish company is to up-grade two existing buildings with a combined floor space of 15,000 sq.m and furnish them with the neces-sary equipment. The preparatory work, including fit-out and staff training, will begin in November this year and production is to launch in September 2014, creat-ing some 170 jobs. Virginia Governor Bob McDonnell has awarded Korona with a USD 0.6m grant for the project. Korona picked Pulaski county due to its loca-tion near the distribution hubs of its main clients as well as access to skilled workers, including Virginia Tech graduates. Founded in 1992 in Wieluń (100km east of Wrocław), Korona develops, designs and produces a wide range
of candles (tealights, pillar candles and candles in con-tainers) most of which are sold under private labels of retail chains. Its daily output totals 9m candles, which translates into an annual production volume of 3.3bn units, two thirds of which are scented candles.
Korona SA makes 9m candles every day. Photo: Korona
"Our decision to launch production in the United States has to do with our fast-paced growth in that market, where our clients include two global corpora-tions, such as IKEA. We have been cooperating with IKEA since 1997 and it is their expansion in the US that has prompted us to consider investing there. Lo-cal production enables us to reach customers more ef-ficiently and helps win new orders in the extremely promising markets of United States and Canada. Last but not least, it will shield us from currency risk. The goal is for our US sales volumes to match what we cur-rently sell in Europe in 4-5 years," said Krzysztof Jabłoński, CEO of Korona SA. Korona's main factory in Wieluń, which currently em-ploys some 820 workers and operates in a continuous 3-shift system, 24 hours / 7 days a week, will likewise continue to expand and it is to remain the group's R&D and technology center. The production process is highly automated and it is carried out using state-of-
the art machinery and equipment. Korona's R&D & product development team includes 35 experts. "Wieluń will remain our most important production facility, where this year alone we intend to invest some PLN 15m. Some of the capex will be financed with EU grants, which we effectively obtain for our innovative projects, particularly ones that focus on production of candles from renewable resources." Korona has been a joint stock company since 2005. It considered listing at the Warsaw Stock Exchange at one point, but the idea has since been shelved. In the financial year ended June 30th, 2013, Korona turned over close to PLN 355m.
BANKING & FINANCE
Poland's second largest Poland's second largest Poland's second largest Poland's second largest bank bids on Rabobank bank bids on Rabobank bank bids on Rabobank bank bids on Rabobank subsidiary BGsubsidiary BGsubsidiary BGsubsidiary BGŻŻŻŻ
Italy's largest bank UniCredit has placed a prelimi-nary offer to buy Poland's Bank BGŻ from Dutch Rabobank, Chief Executive Federico Ghizzoni told reporters. According to market estimates, the price tag on the Polish bank could be somewhere in the region of USD 1bn. A UniCredit spokesman told Reuters the offer, made through UniCredit's Polish unit Pekao SA (number two on the local market), was not binding because the sale process was in a preliminary phase. A spokeswoman for Rabobank, the Netherlands' larg-est retail bank, said the lender was still "reviewing its strategic options" for BGŻ and had not yet decided whether it wanted to sell its 98% stake. The rumors of a potential sale of BGŻ first surfaced back in May, when the Rzeczpospolita daily said Rabobank repre-
sentatives approached Poland's largest banks, with the offer. Rabobank representatives declined to comment on the rumors at the time. Other banks potentially in-terested in BGŻ are said to be France's Credit Agricole, BNP Paribas, Dutch bank ING, and Po-land's Getin Noble Bank, according to sources famil-iar with the situation and Polish media reports. UniCredit's announcement irked the Polish financial markets regulator KNF, whose representatives have recently described the structure of Poland's banking sector as "appropriate," making it clear that further consolidation would not be welcome. Commenting on the Rabobank-UniCredit talks, KNF's boss Andrzej Jakubiak told journalists: "We have some doubts as to the honesty of BGŻ's Dutch owners. A year ago they declared long-term in-terest in the Polish market, and now we are hearing rumors of a potential exit. The situation is all the more uncomfortable as the potential buyers are asking KNF our stance on the issue." Bank BGŻ is number 11 in Poland by assets and its cap-italization totals some PLN 2.5bn, but its stock is any-thing but liquid. Last year Rabobank increased its ownership in the Polish lender by 40%, reaching the current 98% and later boosted the bank's equity by PLN 0.5bn. Although last year Bank BGŻ net-earned PLN 130m, its return on equity ratio is rather low at 4.4%, while its cost to revenue ratio is relatively high at 70%, com-pared to other banks. In most of the markets where it operates, Rabobank is among the top three-top five players, but in Poland the only way to achieve such a position would be through acquisitions, which does not seem to be something the Dutch are ready to dab-ble in at the moment. Time will tell whether their re-ported search for a buyer is just a rumor, a market test-ing exercise or an actual attempt to pull out of Poland.
Foreign banks control about 70% of the Polish banking sector, but several have looked for an exit to boost cap-ital positions hit by the global economic crisis. Major recent exits from Poland's banking market included Belgium's KBC, which sold Polish Kredyt Bank to Spain's Santander, Greek Eurobank EFG (their Polbank EFG merged with Raiffeisen Polska), and Swedish Nordea (their Polish arm was acquired ear-lier this year by Poland's largest lender PKO BP). With some PLN 150bn in assets, the Italian-owned Pekao is currently a strong vice-leader on the Polish market, but its dreams of reaching the top of the podi-um, have been shattered by the PKP BP-Nordea deal, which will boost the former bank's assets in excess of PLN 230bn. The number three player, Spanish-owned BZ WBK (Santander Group), which currently boasts some PLN 101bn in assets and keeps attracting new clients much more effectively than Pekao, may soon merge with Santander Consumer (PLN 7bn in as-sets), becoming a strong contender for the second place. The potential acquisition of BGŻ by Pekao would boost the latter's assets by PLN 37bn, thus ex-panding the distance to its Spanish competitor.
ENERGY & RESORUCES
Warsaw heat & power Warsaw heat & power Warsaw heat & power Warsaw heat & power producerproducerproducerproducerssss moving moving moving moving towards natural gas towards natural gas towards natural gas towards natural gas
Warsaw heat & power operator PGNiG Termika has just sealed a network connection agreement for two gas fired units the company seeks to build in Warsaw over the coming years as part of its efforts to replace its older, less reliable and, more importantly, less envi-ronmentally friendly facilities. Under an agreement with regional gas transmission operator Polska
Spółka Gazownictwa (PSG), two of PGNiG Termika's combined heat & power units (CHPs), in Żerań and Pruszków, will be connected to the gas grid. Both PSG and PGNiG Termika belong to the listed Polish gas company PGNiG, which acquired the War-saw heat & power plants two years ago from Sweden's Vattenfall. In a move to modernize its CHP in the suburban town of Pruszków, which is nearly 100 years old, the company will replace some of the oldest coal-fired boilers with new ones that run on gas. With a ca-pacity of 11 MWe (electricity) and 11 MWt (heat) the small plant will use 21m cb.m of natural gas annually. PSG has agreed to build a 1.7km medium-capacity pipeline to the facility. At its Żerań plant in the north of Warsaw, in 2015 PGNiG Termika plans to launch a gas & oil-fired peaker unit (to be used at times of high demand) with a thermal capacity of 390 MWt, to replace the oldest heat generators, dating back to 1960s. The unit will consume some 20m cb.m a year, to be delivered by PSG until 2018 when the national gas pipeline opera-tor Gaz-System connects Żerań with the Rembelszczyzna pumping station via a 10km high pressure pipeline. The latter project is part of a larger strategic undertaking, as in 2018 a brand new gas-fired heat & power unit (450 MWe/300MWt) is to be com-missioned at Żerań, reducing the plant's dependence on coal and improving its flexibility. Earlier this year, when we spoke to PGNiG Termika, they were hoping to announce a tender for the 450MWe unit before the end of this year. PGNiG is currently developing a very similar power block to-gether with Tauron in the southern town of Stalowa Wola at the cost of PLN 1.6bn but the investor is hop-ing to get the job done in Warsaw for less. A second such unit may be developed in another location in Warsaw around 2020.
"According to our plans, construction of the new gas-fired unit at Żerań will begin in mid-2014 and take some 42 months. Following a start-up phase in 2017, the project will be fully operational stating from Janu-ary 2018," Dorota Kraskowska, spokesperson for PGNiG Termika told Poland Today's Lech Kaczanowski. Besides the new unit in Żerań, PGNiG Termika seeks to convert one of the existing coal-fired boilers at its Siekierki plant in south of Warsaw into a biomass unit, with commissioning expected in Q4 2014. In addition to the Żerań, Siekierki and Pruszkow CHPs, PGNiG Termika operates two heat generation plants (Wola and Kawęczyn). The French-owned Dalkia Warszawa, which oper-ates the Polish capital's district heating network that delivers heat and hot water to some 80% of the city's buildings, is also contemplating the construction of a cogeneration unit in the Warsaw area. The French have zoned in on the rapidly expanding suburb of Ursus where they intend to build a gas-fired heat & power plant (80 MWt and 110 MWe). The main reason both investors are turning to gas in-stead of coal, despite the considerably higher cost of this type of fuel, are EU environmental regulations and the resulting emissions quotas. Another important consideration is the changing shape of Poland's natu-ral gas market. On the one hand, PGNiG has recently negotiated a substantial discount on gas deliveries from Russia, cutting down gas prices for end custom-ers. Secondly, the planned completion of Poland's first LNG terminal in Świnoujście (with a capacity of 5.5bn cb.m) next year will open up new opportunities for gas imports into Poland that should drag prices even fur-ther down. Last but not least, Poland is hoping to tap into new domestic conventional and unconventional gas resources, counting on its own little shale revolu-tion to materialize by the end of the decade.
Poles support shale gas Poles support shale gas Poles support shale gas Poles support shale gas extraction, poll showsextraction, poll showsextraction, poll showsextraction, poll shows
Some 72% of Poles who reside close to shale gas explo-ration areas support the fuel's extraction, according to a survey carried out by TNS Polska for the Ministry of the Environment. The poll also found that 60% of the respondents approve of shale gas extraction close to where they live. Only 7% of respondents oppose shale gas extraction. The survey has also shown that a vast majority of the respondents (92%) had heard of shale gas before, either from (85%), newspapers (54%), ra-dio (49%) or the internet (44%). There were 105 valid exploration licenses as of Sep-tember 1, 2013, held by 35 Polish and foreign entities. So far 48 exploration boreholes have been made. Alto-gether the licensees plan to make 335 boreholes by 2021. Several international explorers have divested or reduced their positions in Polish shale in recent months, including ExxonMobil, Marathon Oil and Talisman Energy, which has dented investor confi-dence although none of the explorers attributed their decision directly to exploration results. Poland, which consumes 15bn cb.m of gas a year, most-ly imported from Russia, has estimated its recoverable shale gas reserves at up to 768bn cb.m. The Polish government, which sees domestic extraction as a way to reduce the country's dependence on Russian gas imports, has been streamlining regulations governing Polish shale to speed up the permitting process, and the country's Treasury has described shale develop-ment as a priority of Polish national interest. So far, however, the proposed regulation has been repeatedly
delayed whereas the geology is proving more difficult than anticipated.
PROPERTY & CONSTRUCTION
PHN teams up with PHN teams up with PHN teams up with PHN teams up with Hochtief on giant Hochtief on giant Hochtief on giant Hochtief on giant projectprojectprojectproject in Warsawin Warsawin Warsawin Warsaw
The Warsaw-listed property group Polski Holding Nieruchomości (PHN) has secured an experienced partner for its flagship development, the office tower on 36 Świętokrzyska St., vis-à-vis Warsaw's most pres-tigious office project Rondo 1. The state-controlled gi-ant is to develop the project, currently referred to as PHN Tower, in cooperation with Hochtief Devel-opment Poland, a fully owned subsidiary of Germa-ny's Hochtief Projektentwicklung. The two partners are to create a 50/50 SPV, with PHN contributing one of Warsaw's most attractive sites, and Hochtief Development Poland taking on responsibility for the overall implementation of the project. Accord-ing to PHN's preliminary plans, the building were to reach some 150m in height and 45,000 sq.m in GLA, but all final details, both financial as well as architec-tural, are yet to be hammered out together by the two companies. A project of similar size that is currently being developed by Echo Investment just a stone's throw from PHN's Świętokrzyska site is set to cost some PLN 500m to build (see page 18). PHN was created in 2011 when the Polish government pooled 180 different real estate and land holdings, to raise funds to help it reduce borrowing. Besides 36 Świętokrzyska St., the group's main assets include a commercial and services centre at 26 Bartycka St. (a popular spot close to the city centre where some 350
retailers sell home improvement goods and services), high-rise Intraco, office building Kaskada and water-front project Dalmor Port Rybacki in Gdynia. Moreo-ver, PHN group is currently developing an office building at Foksal 10A in Warsaw, and in Wrocław – SEGRO Industrial Park Wrocław, developed in a joint venture with the British developer SEGRO. The com-pany is also in charge of some 60 mansions and 41 blocks of flats with 800 apartments, which it took over with Dipservice, a state-owned firm providing housing services to diplomats. Overall, PHN's portfolio com-prises some 150 real properties and over 1,100 ha of land throughout the country.
The image shows one of the earlier takes on PHN Tower, with the final design to be revealed at a later point. The project will replace an office building that currently occupies the site. Image: PHN "The document signed today is part of our strategy that focuses on commercial properties with a signifi-
cant share of modern A and B+ class office space, as well as retail and logistics space. We intend to carry out a number investment projects in cooperation with experienced developers, such as Hochtief Develop-ment Poland, under a joint venture formula," com-mented Artur Lebiedziński, Member of PHN's Super-visory Board. "Our long-term goal is to create a top-class asset portfolio that will provide a stable source of income," Paweł Laskowski-Fabisiewicz, Vice Presi-dent of the company. According to PHN's bosses, their long-term goal is to focus on management and leasing only, but prior to that the group is to develop a number of large new projects, some on its own and some with partners. These investments, which are to include a number of logistics centers, modernization (quite possibly pre-ceded by demolition) of Intraco, and development of PHN Tower, are expected to amount to some PLN 1.9bn over the next two-three years. PHN is also de-veloping residential projects. Having floated the com-pany on the Warsaw Stock Exchange earlier this year, Poland wants to find a strategic investor for PHN and reduce its stake in the group to some 20-25%. The Treasury's current 75% stake in PHN is being valued at PLN 900m, but market insiders are not expecting any deals to be finalized this year. Since its debut on the local market in 1998, Hochtief Development Poland has commissioned a number of well-known projects such as Rondo 1 and Lipowy Of-fice Park. The company develops, sells and manages office, commercial and special-purpose buildings, handling the entire project development process – from investment concept, legal issues, construction process, financing and marketing trough to property management. Its German parent, Hochtief Projektentwicklung, specializes in large inner-city projects, operating as an "interim investor." Over the past 22 years it has completed more than 160 invest-ments of the total value of nearly EUR 6bn.
PROPERTY & CONSTRUCTION
SkansSkansSkansSkanska sells Wrocław ka sells Wrocław ka sells Wrocław ka sells Wrocław project, gets key tenant project, gets key tenant project, gets key tenant project, gets key tenant for Atrium 1 in Warsawfor Atrium 1 in Warsawfor Atrium 1 in Warsawfor Atrium 1 in Warsaw
Skanska Property Poland, part of the Swedish con-struction and property group Skanska, has sold its Wrocław office project Green Day to Investec GLL Global Special Opportunities Real Estate Fund, a fund managed jointly by Investec Bank PLC and GLL Real Estate Partners GmbH. The value of the transac-tion came to EUR 43.4m. Located in the centre of the city on Szczytnicka St., Green Day is a modern class A building, offering a total of 16,060 sq.m of office space, all of which has been leased to an international company from the financial sector. The building is due to be commissioned for use in Q1 2014. All of Skanska’s recent office investments undergo both LEED and EU GreenBuilding certification, and Green Day be no exception. The already completed Green Towers building in Wrocław was the first office project to be LEED Core & Shell certified with the highest Platinum rating, whereas Green Day has been pre-certified at Gold level. "Green Day is yet another office building leased by Skanska before completion and then sold. In the same vein, the office complexes Green Towers in Wrocław and Green Corner in Warsaw were sold very quickly. Skanska’s experience combined with LEED require-ments guarantees that the highest quality product is delivered to the market, which is valued by investors. Green Day's success also reflects the great potential of Wrocław, where we have been investing for a long
time and where we are currently working on our fourth office project – Dominikański. I am confident that it will be highly appreciated both by tenants and investors," said Waldemar Olbryk, President of Skanska Property Poland.
Green Day, pictured above was Skanska's 3rd office development in Wrocław and the company is al-ready working on its 4th: the Dominikański. Image: Skanska
The Dominikański office complex, with a total leasable space of around 40,000 sq.m, will comprise two un-derground levels and seven storeys above ground. Skanska’s new office project will be developed at the meeting point of Piotra Skargi and Kazimierza Wielkiego streets, near the Dominikański Square, the shopping centre Galeria Dominikańska and the histor-ic Market Square. Phase one of the investment, includ-ing the underground car park is due to be completed in Q2 2015, offering around 16,000 sq.m of office and re-tail space. The construction costs for this initial stage of the project have been estimated at EUR 42m.
Skanska Property Poland is the leading office develop-er operating outside Warsaw, with investments in Poznań, Łódź, Cracow, as well as in Wrocław, where it
has just launched its 4th project. In Warsaw, the com-pany is building one of its most ambitious undertak-ings to-date - Atrium 1, which according to Skanska will be the greenest office building in Central and Eastern Europe. The project is to reach completion by the end of this year, offering 18,000 sq.m.
DATA BOX: WROCŁAW OFFICE MARKET IN 1H 2013 In H1 2013, the transaction volume in Wrocław’s mod-
ern office market reached nearly 51,000 sq.m, with
new leases accounting for 43% of which pre-lets ac-
count for over 50%. It represents nearly a threefold
rise on the leasing volume recorded in the same peri-
od of 2012. The largest deals were the Getin Group’s
lease of 11,700 sq.m in the Sky Tower office building
and Kruk’s 7,500 sq.m lease expansion in Wrocławskie
Centrum Biznesu.
At the end of June 2013, the city’s office stock stood
at 510,000 sq.m, up by more than 40,000 sq.m com-
pared with the beginning of the year, largely following
the delivery of office space in the Sky Tower (28,000
sq.m) and phase II of Skanska’s Green Towers complex
(10,800 sq.m). If all projects planned for 2013 are
completed on time, this year’s supply will total around
80,000 sq.m.
The vacancy rate rose in Wrocław by nearly 4.4 per-
centage points to 12.4% from the rate of December
2012. Headline rents stood at EUR 13–16/sq.m/month,
with effective rents at EUR 11–14/sq.m/month.
Source: Cushman & Wakefield
In the last week of September, Skanska signed a 12-year agreement with a key tenant for Atrium 1, Po-land's third largest bank BZ WBK, belonging to Spain's Banco Santander. The bank will take up
12,200 sq.m at Atrium 1, making it the largest office deal in Warsaw's central business district in years. Atrium 1 will house the new headquarters of BZ WBK along with the bank's flagship branch. The remaining space in the office building, located by one of War-saw's key intersections, Rondo ONZ, will be occupied by the property consultancy CBRE as well as the de-veloper, Skanska Property Poland itself.
Skanska Property Poland has been operating in Poland since 1997 and is part of the Skanska Group, one of the world’s leading project development and construction groups. The group currently has 57,000 employees in selected home markets in Europe, the U.S. and Latin America. Skanska's revenue in 2012 totaled EUR 15.2bn.
PROPERTY & CONSTRUCTION
Echo picks contractor Echo picks contractor Echo picks contractor Echo picks contractor for PLN 500m office for PLN 500m office for PLN 500m office for PLN 500m office tower in Warsawtower in Warsawtower in Warsawtower in Warsaw
The Warsaw-listed Echo Investment, one of Po-land's top property developers, has named Modzelewski & Rodek the shell contractor for its flagship project in Warsaw's city centre, the 155-metre Q22 office tower that will emerge at the site of the former Mercure hotel, at the intersection of Jana Pawła II Avenue and Grzybowska Street. Modzelewski & Rodek has built many of Poland's high-rise buildings including Warsaw's Złota 44 resi-dential tower, Intercontinental Hotel, Babka Tower, Warta S.A. building, PZU Tower, Warsaw Financial Center and ILMET centre as well as Sea Towers in Gdynia.
Estimated at PLN 500m, Echo's new Q22 building is to reach completion in Q1 2016, delivering nearly 50,000 sq.m of class-A office space to Warsaw's central busi-ness district. The investor has just finished demolish-ing the former hotel (having reclaimed some 1,500 tons of steel and 25,000 tons of concrete aggregate in the process) and it is now embarking on the construc-tion of the underground section of the high rise.
Q22 was designed by
Kuryłowicz
& Associates in cooperation with
Buro Happold
Polska.
Image: Echo Investment
Echo is currently working on another major office project in Warsaw, the 32,000 sq.m Park Rozwoju on Konstruktorska St. in the Mokotów district, near the Chopin Airport and the recently opened southern sec-tion of the Warsaw ring road. The project will com-prise two buildings with separate courtyards, with a restaurant located in the connector, and some 740 parking places. Already at the design stage Park Rozwoju was BREEAM pre-certified with a "very good" rank. Phase one of the project is to be delivered in Q1 2014, whereas phase two is scheduled for com-pletion in Q2 2015. The first major tenant is Schnei-
der Electric Polska, which has secured 7,000 sq.m of offices at Park Rozwoju to fit approximately 700 staff. In August the BZ WBK bank granted Echo Invest-ment a EUR 22.4m loan for the project.
West Gate will be Echo's 4th project in Wrocław. Image: Echo Investment
In mid-September, Echo Investment broke ground on a 16,000-sq.m class-A office project in Wrocław. The West Gate building will be Echo's fourth development in the city, following the shopping centre Pasaż Grunwaldzki, office project Aquarius Business House, and residential complex Przy Słowiańskim Wzgórzu. The company has invested more than PLN 1.2bn in Wrocław to-date, having delivered some 80,000 sq.m of floor space across its three finished projects in the city. Phase one of Echo's first office project in Wrocław, Aquarius Business House, was sold in July to Spain's Azora Europe for EUR 41.9m. Echo Investment focuses on four key sectors of the re-al estate market: housing, shopping and shop-ping/entertainment centers, office buildings and ho-tels. To-date, the company has completed over 100 projects in several Polish cities, with a total area of ca. 900,000 sq.m. Besides Poland, the Kielce-based devel-oper manages investments in Romania, Hungary and in Ukraine. Its consolidated net income came to PLN 373m last year, up from PLN 208m in 2011, whereas the respective revenue totals came to PLN 584m and PLN 407m. In the first half of 2013 Echo's net earnings
doubled y/y and reached PLN 302m, while its net rev-enues remained almost unchanged at PLN 365m.
SERVICES & BPO
IBM namesIBM namesIBM namesIBM names location location location location ofofofof Katowice IT centerKatowice IT centerKatowice IT centerKatowice IT center
In one of the largest office lease deals in Poland's re-gional cities, US IT Services giant IBM has secured 9,000 sq.m at Katowice's A4 Business Park, developed by Polish Echo Investment. The project, which launched in August, has already created 400 jobs by and in two years' time later the figure is to reach 2,000. The new facility will join a global network of IBM cen-ters that render a broad range of IT services including: the management of server operating systems, system protection and security, end-user services including the maintenance and monitoring of IT equipment and software systems. IBM is to cooperate with Silesian universities in order to introduce some of the hottest topics in IT, such as cloud computing, into their cur-ricula. "Since 2009, when we opened an IBM delivery centre in Wrocław, the scope and reach of our offer of ser-vices has been considerably extended. The centre in Katowice will be built in accordance with IBM’s global standards in order to provide our clients with top quality services," said Stef Stangret, director of IBM Service Delivery Centres in Poland. A4 Business Park is being developed on Francuska Street in Katowice, near an exit from the A4 motor-way. It is a modern business park comprising three of-fice buildings and a separate multi-storey car park.
Phase one of the development, scheduled to reach completion in Q1 2014, will be a seven-storey office building with an area of app. 9,000 sq.m. The project has been BREEAM precertified with a "very good" mark.
The IBM Delivery Center in Katowice will be mov-ing into A4 Business Park in early 2014. Image: Echo Investment
IBM is one of the largest IT companies in the world, offering a broad range of consulting and IT services, software as well as IT systems and technologies. The US giant established its first Polish office in Warsaw in 1935, but the company had been serving customers in Poland since the 1920s when it delivered tabulating machines to the Locomotive Construction Factory. Headquartered in Warsaw, IBM Poland has sales and service support units in Gdańsk, Kraków, Katowice, Wroclaw and Poznań. The company provides a full range of products and services to build IT infrastruc-ture for large enterprises, public administration and medium-sized companies across multiple industries helping them solve some of their most-challenging and data-intensive problems. Besides operations aimed at domestic customers, IBM also has a number of key fa-cilities across Poland that its clients around the world. "As the key city of the Silesian Metropolis, which has a population of 2m, Katowice is a strong economic and academic centre of Poland. In the past, Katowice was
solely associated with heavy industry; today, it is un-dergoing a complex transformation and becoming an attractive destination for the business services sector," said Patricia Lannoije, Head of Research and Consul-tancy at property company Jones Lang LaSalle in a re-cent commentary on the local market.
DATA BOX: KATOWICE OFFICE MARKET IN 1H 2013 Leasing volume in Katowice’s office market reached
27,500 sq.m in H1 2013, with pre-lets accounting for
51% of the total. The largest deals involved owner oc-
cupation of space. Polski Koks took up over 6,150 sq.m
in the office building in Paderewskiego Street, while
the companies from group Getin Bank and LC Corp
signed a lease for 6,000 sq.m in phase one of the LC
Corp Tower project.
At the end of Q2 2013, Katowice’s office stock ex-
ceeded 300,000 sq.m, largely following the comple-
tions of Nowe Katowickie Centrum Biznesu (13,000
sq.m) and Polski Koks’ head office (6,150 sq.m). Under
construction are the passive office building (6,000
sq.m) developed within the Euro-Centrum Science and
Technology Park and the first two phases of Skanska’s
Silesia Business Park totaling more than 20,000 sq.m.
The vacancy rate in Katowice was up by over 1.5 pps
to 8.3% from the rate at the end of 2012. Asking rents
stood at EUR 13–14/sq.m/month in Q2 2013, with ef-
fective rents at EUR 11–12/sq.m/month.
Source: Cushman & Wakefield
Katowice is located in one of Po-land's most industri-alized regions, at the intersection of two trans-European transport corridors. Its main feature is its very good transportation infrastructure, with three in-ternational airports located within a short distance and the well-developed road network, with direct ac-
cess to two motorways (the A1 and the A4) as well as the Silesian Intercity Road (DTŚ). Katowice is also a major railway hub, linking the city to virtually all des-tinations in Poland and around Europe. The city spends more than 30% of its budget on investment and it has been very active lately in attracting new projects. "With its pool of highly-skilled employees, scientific and technical potential, strategic location, well-developed infrastructure, extensive support from city authorities, access to modern office space and high quality of life Katowice is now considered an excellent destination for new investment projects. The city was selected by leading global companies, including ad-vanced business services sector representatives Capgemini, Unilever, Ericsson, Oracle and PwC to name but a few," said Lannoije.
SERVICES & BPO
WarsawWarsawWarsawWarsaw----listed Orbis listed Orbis listed Orbis listed Orbis expands Mercure chain expands Mercure chain expands Mercure chain expands Mercure chain in Latvia & Polandin Latvia & Polandin Latvia & Polandin Latvia & Poland
Poland's leading hotel operator, the French-owned Orbis Hotel Group has signed a franchise agreement for its third hotel in the Baltics - Mercure Riga Centre. Located in a historic building in the centre of the Lat-vian capital, redeveloped by a Ukrainian investor, the four-star hotel will open in the first half of 2014 offer-ing 143 rooms. "Latvia and the remaining two Baltic states are among Europe's fastest growing economies at the moment. We want to have 1-2 properties in each of those coun-tries, under management or franchise agreements," says Laurent Picheral, CEO of Orbis Group.
On 3rd October company inked a franchise deal for a Mercure hotel also in Poland. Located in the historic centre of Bydgoszcz, the new Mercure Bydgoszcz Se-pia will open in mid-2014 as the only four-star hotel in this part of the city. It will include 90 rooms, confer-ence facilities, restaurant and a roof terrace. Orbis is part of Accor, Europe's number one hotel op-erator with 3,500 hotels and more than 440,000 rooms across 92 countries. The group entered Poland in 1973 through Novotel franchise with Orbis in which it be-came a majority shareholder 35 years later. Mercure is Accor's mid-range brand with 746 properties world-wide.
Mercure Riga Center Latvia will be located in a his-toric tenement building, dating back to 1901. Photo: Orbis
The Orbis Hotel Group manages 60 hotels in Poland and two in Lithuania with 11,500 rooms under the ibis, ibis Budget, Mercure, Novotel, Sofitel and Orbis Ho-tels brands. In 2010 Orbis embarked on an asset-light strategy, which prioritizes the company's role as a ho-tel operator and expansion via management and fran-chise agreements, striving for higher efficiency and fo-cusing on hospitality as its core business. Hence, Orbis
has been gradually restructuring its asset portfolio, seeking ways to refinance certain real properties with the help of long-term investors. The Riga deal was Orbis' 14th franchise agreement under the asset-light model. Most of the group's new hotels are being developed under Mercure and ibis Styles conversion brands, which Orbis sees as best fit-ting the franchisee market. The French group is tempting potential partners with its dominant market position, booking system that generates close to a half of hotel revenue in Europe, 250-strong global sales force and loyalty program which boasts 8.5m members worldwide including 160,000 in Poland. In August, Orbis signed a franchise agreement for a new ibis Styles hotel in the southern Polish town of Nowy Sącz, to be developed by a local investor. With 57 rooms, the three-star property will open in Q4 2014 as the first hotel in Nowy Sącz belonging to an inter-national chain. Last year Orbis launched ibis and ibis Budget Reduta in Warsaw, right in time for the Euro 2012 tournament. A similar double project was opened in Krakow, alongside an ibis hotel in the Lithuanian city of Kaunas. A Novotel hotel was opened earlier this year in Łódź, while a Mercure/ibis Styles combo is under construction in Sosnowiec. The Warsaw-listed Orbis posted consolidated reve-nues of PLN 707m in 2012 (up from PLN 693m in 2011), while its attributable net profit totaled PLN 68m, down from PLN 119m in 2011. The company has recently embarked on a PLN 100m investment pro-gram, seeking to upgrade some of its key properties by the end of 2014. Some 90% of the total amount is to be spent in Warsaw, where Orbis operates 11 hotels. The combined price tag on the ongoing makeovers of Mercure Warszawa Centrum, Novotel Warszawa Cen-trum, and Sofitel Victoria Warszawa is PLN 75m.
TRANSPORT & LOGISTICS
Amazon toAmazon toAmazon toAmazon to relocate relocate relocate relocate German distribution German distribution German distribution German distribution hubs to Polandhubs to Polandhubs to Polandhubs to Poland
One of last week's top business stories, broken by the daily Puls Biznesu, covered the alleged plans by US e-commerce giant Amazon to develop a brand new dis-tribution hub for continental Europe, consisting of three logistics centers in Poland and two in the Czech Republic. According to unnamed sources quoted by the paper, Amazon is take its packaging and distribu-tion business out of Germany, where workers at one of its eight warehouses have recently gone on strike, to the CEE, where wages are way lower, and employees much less demanding.
Polish employees are to start handling the sorting, packing, and dispatching of Amazon's customer or-ders in Europe next year. Photo: Amazon
According to the report, in Poland, Amazon will have two logistics hubs near Wrocław (to be developed by
Panattoni and Goodman) and one in Poznań (Panattoni). Each of the projects will be worth EUR 50-60m and cover an area of 100,000sq.m. The com-pany will employ 6,000 people in Poland, plus an addi-tional 9,000 seasonal employees, a source quoted by the daily said. Unfortunately, neither Amazon nor the warehouse de-velopers wanted to comment on these revelations, but local officials from Poznań and Wrocław have con-firmed that Amazon is indeed getting ready to shift the bulk of its European logistics operations to Poland. The first of the three hubs is to open in Poznań next year, just in time to take on Amazon's pre-Christmas delivery frenzy. The Australian developer Goodman is currently build-ing its 128,000 sq.m Goodman Wrocław East Logistics Centre in the city, but due to its size and strategic im-portance the Amazon project is likely to be an inde-pendent, built-to-suit development. US Panattoni has four parks in the Wrocław area, two of which are fully occupied, whereas the remaining two offer a com-bined 80,000 sq.m. In the Poznań region Panattoni likewise has four properties, but the amount of space on offer across these centers amounts to little more than 20,000 sq.m, which again suggests that the Ama-zon hub will be an entirely separate development. Ac-cording to local officials, Amazon's Poznań hub will be situated in Sady, in the Tarnowo Podgórne area, which is home to some 4,000 companies, including the likes of MAN, Scania, Volvo, Lidl and Auchan. The completion of key motorway links to Germany in recent years put Poland in the spotlight of Western European e-retailers, a number of whom have already set up distribution hubs in the Szczecin, Poznań, and Wrocław regions, and many more are said to be get-ting ready to follow suit.
Amazon employs 9,000 people in Germany at eight lo-gistics centers, two customer service centers and at the German headquarters in the southern city of Munich. In mid-September several hundred of its employees went on strike in Germany in a planned three-day walkout over pay, unions said. The unions are de-manding that Amazon's German employees be paid according to a sector-wide wage deal for the retail and mail-order industries. But the head of Amazon Ger-many, Ralf Kleber, rejected such demands in press in-terviews. Amazon says it pays an hourly wage of EUR 9.30 to employees in their first year and then EUR 10 after that, whereas the unions call for a minimum hourly wage of EUR 10.66. Amazon's working condi-tions in Germany were the subject of a public televi-sion documentary earlier this year which accused the group of bringing workers in from crisis-hit countries such as Spain to work at Amazon warehouses. The documentary alleged that employees were subjected to bullying from security personnel, some of whom wore clothing associated with neo-Nazi groups. It also al-leged that Amazon paid the workers less than adver-tised and that their belongings were regularly searched in the temporary housing they were provid-ed.
TRANSPORT & LOGISTICS
Mid Europa adds 2nd Mid Europa adds 2nd Mid Europa adds 2nd Mid Europa adds 2nd ski lift operator to its ski lift operator to its ski lift operator to its ski lift operator to its Polish portfolioPolish portfolioPolish portfolioPolish portfolio
Mid Europa Partners, a major private equity player in Central Europe, has sealed its second acquisition in Poland's mountain tourism sector at the end of Sep-tember, with the purchase of a majority stake in Kolej Gondolowa Jaworzyna Krynicka from leading Polish financial institutions, PZU and PKO BP. Lo-
cated in Krynica, Poland's second most popular moun-tain tourist destination, Jaworzyna Krynicka is one of the country's leading ski lift operators. The transaction came merely weeks after Polskie Koleje Gorskie (PKG), an entity set up by four com-munities from Poland's Tatra region, in which Mid Europa holds a majority stake, had taken over Poland's leading cable car & ski lift operator Polskie Koleje Linowe (PKL) from the state-owned railway compa-ny PKP. "We are pleased to have been able to complete this at-tractive investment shortly after the PKL acquisition. Combining PKL and Jaworzyna Krynicka under the PKG platform represents a key milestone in creating a market leader able to compete for tourists and skiers with mountain resorts in other countries," said Zbigniew Rekusz, Partner of Mid Europa.
Backed by municipalities from the Tatra region, Mid Europa is consolidating Poland's ski-lift and moun-tain tourism operators. Photo: Jaworzyna Krynicka PKG, in which Mid Europa holds a 90% stake, sealed the PLN 215m acquisition of PKL in the beginning of September. PKL is the largest and the oldest cable car,
funicular, ski lift and ski slope service provider in Po-land with presence in six locations in the Polish moun-tains, including flagship operations at Kasprowy Wierch and Gubalowka in Zakopane. With net profits of PLN 9.1m in 2011 (representing profitability of approx 25%), PKL operates nine cable cars, seven ski lifts and 100ha of ski slopes. It carries 6m passenger annually. Mid Europa and the local communities are committed to pursue a coordinated growth strategy for the busi-ness and expand it, both organically and through ac-quisitions, in order to strengthen its market position and leverage the consolidation potential, the London-based private equity company said in a statement. As for the newly-acquired Jaworzyna Krynicka, PKG's shareholders will seek to co-operate with the Krynica municipality to support long-term sustainable growth in the region. Over the coming five years the partners seek to invest tens of millions PLN into PKL assets in an effort to introduce Alpine quality standards to Polish resorts. Since large areas of the Tatra Moun-tains belong to a nature preserve, investments in the region will be challenging, although with local munic-ipalities as its business partners, Mid Europa should have it easier than any external buyers, such as Slo-vakia's Tatry Moutain Resorts, which had been strongly interested in acquiring the Polish operators. Following the customary five-year period, Mid Europa Partners will seek to exit PKG, most likely through a Warsaw IPO. "We have identified leisure and tourism sector as a strong growth opportunity and believe that PKL, with its established presence in the most popular Polish mountain locations, represents an attractive entry route and consolidation platform in this market. We plan to actively contribute to the success of the Com-pany and support its growth by leveraging our experi-ence in the services sector," Mid Europa's Zbigniew Rekusz commented on the PKL deal.
CONSUMER GOODS & RETAIL
Żabka acquires three Żabka acquires three Żabka acquires three Żabka acquires three local retail chains, adds local retail chains, adds local retail chains, adds local retail chains, adds PLN 200m to turnoverPLN 200m to turnoverPLN 200m to turnoverPLN 200m to turnover
Poland's leading convenience store operator Żabka Polska has agreed to acquire three local supermarket chains in Poland with combined annual turnover of PLN 200m. The 32 newly acquired outlets will become part of Żabka's supermarket chain Freshmarket. "We have close to 2,800 Żabka stores and nearly 400 Freshmarkets in Poland at the moment," Żabka Polska's Jacek Spychałą tells Poland Today. "Since the beginning of the year we have launched some 300 new units, divided almost evenly between the two chains. We indeed to keep up that parallel development in the future." The first of the three businesses to be taken over by Żabka is the Częstochowa-based PS Food. Established in 1996 it employs 400 staff across 18 stores, with an average size of 420 sq.m and inventory ranging from 2,800 to 7,800 items per store. The second one was AGAP, established in 2001 and operating eight outlets in the Gorzów Wielkopolski area. With an average floor space of 330 sq.m, AGAP stores carry between 5,000 and 7,000 items each and employ 150 staff. The third and final transaction concerns TORG, a Koszalin-based retailer with 130 employees and six outlets averaging 290 sq.m in terms of their floor area and 4,500 sq.m items as far as their inventory size is concerned. "Our strategy relies on organic growth as well as active participation in the consolidation of the Polish market. The acquisition of AGAP, TORG, and PS Food means
not only a step forward in our expansion, but also new prospects for their employees. Thanks to our know-how and strong brand we can guarantee further growth of the acquired outlets and give their custom-ers an attractive offer and high service quality stand-ards," says Julio Duarte, Vice-President & CEO of Żabka Polska.
Convenience stores, such as Żabka and Freshmarket are the fastest growing segment of Poland's retail sector after the expansion of large-sized outlets has come to a standstill. Photo: Żabka Polska Founded in 1998 by the same people who created Po-land's leading discount supermarket chain Biedronka, and later supported by AIG New Europe Fund, in 2007 Żabka Polska was acquired by the Czech-Slovak private equity company Penta Investments from AIG Global Investment Group and Świtalski & Synowie for more EUR 150m. Under Penta's manage-ment, besides speeding up the expansion of its net-work of small convenience stores Żabka, including their entry to Czech Republic, in 2009 the company created a new chain of convenience outlets in a deli-format under the Freshmarket logo. In February 2011 Penta sold Żabka Polska to private equity fund Mid Europa Partners for EUR 400m. With Penta at its
helm, Żabka Polska saw its gross revenues increase by almost 42% while its EBITDA increased by 62%, mak-ing it the fund's best investment in Poland and one of its top three projects ever. The 2012 was a record year for the company, with 366 new Żabka and Freshmarket outlets opened during the period – an average of one opening per day. With a turnover of PLN 3.3bn in 2012, Żabka Polska ranked as Poland's 10th largest retailer by sales. Żabka stores are operated by independent entrepreneurs, but whom the company provides with fully furnished and stocked up retail units. It's been nearly three years since Mid Europa Partners invested in Żabka, and as a private equity investor, the fund may soon start looking for buyers interested Polish business. This could provide a rare opportunity for a new global player to enter the local market. Ac-cording to some market insiders, the Tokyo-based Seven & I Holdings Co., Ltd., the world's 5th largest retailer, with 35,000 stores in approximately 100 countries, known primarily as the owner of the 7-Eleven chains in the US and Japan, among other mar-kets, used to contemplate entry into Poland a few years ago, but recently they've been so busy with ac-quisitions in North America that Central Europe may have fallen off their priority list.
FOOD & AGRICULTURE
Kompania Piwowarska Kompania Piwowarska Kompania Piwowarska Kompania Piwowarska to investto investto investto invest PLN 100m PLN 100m PLN 100m PLN 100m inininin Poznań breweryPoznań breweryPoznań breweryPoznań brewery
Although the fat times for Poland's beer industry seem to be long gone, faced with shrinking sales and in-creasingly picky customers, breweries are not giving
up without a fight. Earlier this year Danish Carlsberg announced a major extension of one of its Polish plants, and now the country's top beer maker, the SABMiller-controlled Kompania Piwowarska is embarking on a PLN 100m investment at its Poznań brewery. The company seeks to install an additional 10 tanks at its fermentation plant and as well three new tanks for finished beer, or beer right after filtration and before packaging. All of the new tanks will be built in addi-tion to Kompania's existing facilities and housed in a single 500 sq.m complex.
The PLN 100m investment program enables Kompania Piwowarska to remove certain produc-tion & storage bottlenecks and create more space for innovations. Photo: Kompania Piwowarska
"We are aware of the fact that in an increasingly ma-ture market one cannot expect to grow organically and keep boosting sales. At the same time, the pace of in-novation in the market keeps increasing and breweries compete by broadening their product range," Paweł Kwiatkowski, Corporate Affairs Director at Kompania Piwowarska, tells Poland Today. "With this invest-ment the company aims to improve brewery flexibility
and streamline the management of production phases between beer brewing and dispatch from the brewery site. The new layout will be particularly favorable for brewing smaller batches of beer, including trial batch-es of innovation products. This is how we improve our competitiveness and strengthen our market leader-ship."
At the existing finished beer warehouse, a 5,000 sq.m facility, a new returnable bottling line will be installed, with a capacity of 60,000 bottles per hour. The new packaging line will be operational in Q1 2014, in time for the 2014 summer season. As part of the ongoing in-vestment , a 4,000 sq.m pack storage site will be erected next to the fermentation plant.
Beer market in 2012: breweries & market shares
Carlsberg
Others
Żywiec
(Heineken)
KP (SAB-
Miller)
Source: Breweries, Browary Polskie
"We brew and pack the most diverse range of brands in the most diverse range of packaging. In Poznań alone we employ over a thousand people and, in addi-tion, we generate roughly 6,500 jobs in supply sectors throughout the Wielkopolska region," says Paweł Kwiatkowski. "This expansion sends a message that
we intend to maintain our leading position in the in-dustry, which we achieved a few years ago." The company's brand portfolio includes best-selling Polish beers: Tyskie, Żubr, Lech, Dębowe Mocne, Redd's as well as international premium brands: Pils-ner Urquell, Grolsch and Peroni Nastro Azzurro. Kompania Piwowarska, established in 1999, operates three breweries (in Tychy, Poznań and Białystok) and depots across the country. With a staff of 3,200, Kompania Piwowarska turned over PLN 4.4bn last year and posted net earnings of PLN 703m. In 2011 the respective results had come to PLN 4.7bn and PLN 861m. According to Paweł Kwiatkowski, the new in-vestments ion Poznań may result in creation of some 30 new jobs, at the same time reducing seasonal fluc-tuations in workforce, which tend to be quite signifi-cant in the brewing industry. Kompania Piwowarska is part of SABMiller plc, one of the world's largest brewers with brewing interests or distribution agreements across six continents. In the year ended on 31 March 2013, the group reported USD 6.4bn in gross profit (EBITA) and group revenue of USD 34.5bn. SABMiller plc is listed on the London and Johannesburg stock exchanges. Competing in a saturated market Beer sales in Poland increased 5% last year reaching a record level of 37.9bn hl. Kompania Piwowarska saw its sales reach 14.2m hl, keeping its market share at 38%. The runner up, Grupa Żywiec (Heineken) re-ported a 3% increase (to 11.6m hl). The most dynamic performer among Poland's top three breweries last year was Carlsberg. The Danish beer maker maintained its double digit growth pace with a 15% sales in-crease (in value & volume) in 2012 - in a market that rose by merely 5%. The growth boosted Carlsberg's 2012 share in the Polish market to 18.5% in volume terms and 17.8% by turnover. In order
to keep up with its increasing sales, Carlsberg has re-cently added new PLN 60m (EUR 15) bottling to their Okocim brewery in Brzesko (50km east of Kraków) and announced a large-scale expansion of its Kasztelan brewery in Sierpc (120km northwest of Warsaw). Estimated at PLN 187m (EUR 45m), the pro-ject will boost Carlsberg Polska's annual production capacity from the current 7m hl up to 8.5m hl, enabling the company to further increase its market share.
Is there room to grow in Poland's beer market? Beer consumption in Poland (in liters per capita)
60
70
80
90
100
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: Browary Polskie, GUS
"Our medium-term goal is to pass the 20% mark but without new investments we simply cannot get there. Currently our Polish breweries operate at capacity," Tomasz Bławat, CEO of Carlsberg Polska told Poland Today's Lech Kaczanowski earlier this year. "The new line will be operational in mid-2014 and it should reach full capacity by the end of the same year." According to Carlsberg's March projections, the Polish beer market is forecast to shrink 2% in volume terms this year, with Carlsberg expecting its sales to grow 3-4%. "Beer consumption in Poland came to 98l per capita last year and it would take a major surge in disposable
income to push that figure any higher. The market is pretty much saturated and growth here means tough competition and more emphasis on innovations and specialties," Mr. Bławat said.
FOOD & AGRICULTURE
Bridgepoint seals 2nd Bridgepoint seals 2nd Bridgepoint seals 2nd Bridgepoint seals 2nd deal in Poland, buys deal in Poland, buys deal in Poland, buys deal in Poland, buys private label biscuit private label biscuit private label biscuit private label biscuit maker Dr Gerardmaker Dr Gerardmaker Dr Gerardmaker Dr Gerard
France's Groupe Poulot has sold Polish private label biscuits maker Dr Gerard to private equity company Bridgepoint for an undisclosed amount. The deal is Bridgepoint's second in Poland, the other being its 2008 acquisition of railroad freight company CTL Logistics. Established in 1993, Dr Gerard is now a leading biscuit producer in Poland selling its products to all retail formats. The company operates from three sites across Poland where it employs over 950 people and in re-cent years has developed a growing export business to the wider CEE region having transformed itself from a local company to a significant international player. Today, the business offers its customers some 200 types of products in all biscuit segments, from onion crackers to apricot cream sticks. The Polish biscuits market remains fragmented with the top four players holding just over a third of the market. The sector is forecast to continue to grow at 6% per annum as new product is introduced to the market and consumption converges towards Western European levels, Bridgepoint said. Growth is also ex-
pected to be driven by product innovation, a key strength of Dr Gerard. "Dr Gerard has transformed itself into a leading player and is already well positioned for further long term growth in its market following its successful multi-channel strategy. With its differentiated and innova-tive value-for-money products, strong preferred part-nership status with its trade customers and robust op-erational execution, it is set to consolidate its position in Poland and develop a significant international plat-form in the CEE, commented Khai Tan, partner re-sponsible for Bridgepoint's activities in the CEE re-gion.
According to Nielsen, Dr Gerard's PryncyPałki was Poland's best-selling packaged biscuit brand in 2012, in volume-terms. Photo: Dr Gerard Groupe Poult, an investment of LBO France, ac-quired Dr Gerard just three years ago. At the time it operated under the name Lider SKG before rebrand-ing in 2011. LBO France bought Groupe Poult in 2006 and put the French biscuit maker on the block in 2010, at the same time it was pursuing Dr Gerard, but failed to find a buyer. The firm hired Rothschild earlier this year as it looks for an exit once again.
Bridgepoint is a European middle market private equi-ty firm with over EUR 12bn of committed funds to date from a world class investor base. Over the past decade it has completed over 54 transactions totaling more than EUR 17bn. Bridgepoint's investment focus is on established, market-leading companies valued up to EUR 1bn that combine good market share, diversifica-tion, brand strength, quality of products or services and first-rate management. Sector-wise, it targets pri-marily business services, consumer, financial services, healthcare, manufacturing & industrials and media & technology. Bridgepoint has set up a separate unit, Bridgepoint Development Capital, for investments in companies valued up to EUR 150m.
POLITICS & ECONOMY
Q3 PMI at highest level Q3 PMI at highest level Q3 PMI at highest level Q3 PMI at highest level since Q2 2011, good since Q2 2011, good since Q2 2011, good since Q2 2011, good news for labor marketnews for labor marketnews for labor marketnews for labor market
The recovery in Poland's manufacturing sector gained pace in September, bringing the average manufactur-ing purchasing managers' index (PMI) in Q3 to its highest level since Q2 2011. The survey of 300 indus-trial companies, prepared by Markit Economics for HSBC, showed PMI rise to 53.1 points in September from 52.6 points in August, the third consecutive month above the key 50-point threshold, which sepa-rates expansion from contraction. According to the bank, the output index rose in Sep-tember thanks to increased new orders, production levels and an improvement in employment, while price pressures remained subdued. "The Q3 2013 average, at 52.3, is the strongest since Q2 2011 and marks a significant improvement over the
first half of this year when the PMI index averaged just above 48 points in both quarters. While output and new orders indices corrected lower in September, stock of purchases and employment improved. The employment index rose to the highest level in more than six years. This is very promising against the pre-vailing weakness of consumer demand since mid -2012 on the back of weak labor market. The PMI still points to benign inflation outlook. Output prices continued falling in September despite rising input prices. This contrast shows limited pricing power and still indi-cates fragility of the emerging recovery," said Agata Urbanska-Giner, Economist, Central & Eastern Eu-rope at HSBC.
Purchasing Managers' Index (PMI)
The 50 mark separates growth from contraction
45
46
47
48
49
50
51
52
53
54
Jul 12 Sep 12 Nov 12 Jan 13 Mar 13 May 13 Jul 13 Sep 13
Source: Markit & HSBC
"Overall the positive PMI reading in Q3 this year sup-ports our forecast of economic growth gradually re-covering from the Q1 2013 bottom. We expect GDP growth to increase from 1% y-o-y in 2013 to 2.6% in 2014," she added.
Economic sentiment and consumer confidence indicators
-40
-20
0
20
De
c 1
0
Ma
r 11
Ju
n 1
1
Se
p 1
1
De
c 1
1
Ma
r 1
2
Jun
12
Sep
12
De
c 1
2
Ma
r 13
Jun
13
Se
p 1
3
60
80
100
120 Co nsumer confid ence (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
- Net foreign assets 176,278 160,267 159,749 154,035 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
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The financial sector's net lending in PLN bn,
loan stock at the end of period
Type of loan May '13 Jun'13 Jul '13 Aug '13
Loans to customers 887,960 900,999 896,635 901,863
- to private companies 259,593 263,453 261,000 263,491
- to households 549,117 553,055 552,503 556,027
Total assets of banks 1,622,666 1,634,587 1,616,221 1,627,182
