Poland Today Business Review+ No. 008

No. 008 / 21st October 2013 / www.poland-today.pl / magazine, conferences, portal, newsletter

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MANUFACTURING & PROCESSING Germany's Bilfinger acquires Polish filter maker ELWO, wins new contracts page 2

BANKING & FINANCE

Alior's share price plunges after regulator enforces stricter bookkeeping page 3

Polish bankers lobbying for easier access to mortgage-backed bonds page 4

ENERGY & RESOURCES

Italian contractors break ground on waste-to-energy plant in Bydgoszcz page 5

Six out of Europe's ten most polluted cities are in Poland, says new EEA report page 6

PROPERTY & CONSTRUCTION

UBM gets permit for Wrocław office project page 7

CONSUMER GOODS & RETAIL Kraków's BIK joins ranks of small-town retail park developers page 9

SERVICES & BPO

Finnish Kemira picks Alchemia for Gdańsk service delivery centre page 10

TRANSPORT & LOGISTICS

Regulator greenlights Lotos and BP's aviation fuel joint venture page 11

FOOD & AGRICULTURE

Sugar giant KSC to acquire Agros-Nova's processing plant in Włocławek page 14

IT & TELECOM

French mobile app developer Playsoft moving to new offices in Gdańsk page 15

POLITICS & ECONOMY

Consumer inflation tops 1% in September, corporate wages growing faster than expected page 17

KEY FIGURES

Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 18-20

Kellogg acquired Pringles in 2012, becoming the world's No. 2 savory snack maker. Photo: Pringles

Kellogg to produce Kellogg to produce Kellogg to produce Kellogg to produce Pringles Pringles Pringles Pringles in Polandin Polandin Polandin Poland US Kellogg Company, owner of the Pringles brand, will launch production of savory snacks in Poland next year. Their factory in Kutno, 110km west of Warsaw, is to create 100 jobs. page 13

Danish Rockwool Danish Rockwool Danish Rockwool Danish Rockwool investinginvestinginvestinginvesting PLN 280mPLN 280mPLN 280mPLN 280m Mineral wool giant Rockwool is embarking on a PLN 280m modernization of its Polish factories, aiming to boost quality, efficiency and environmental standards. page 2

weekly newsletter # 008 / 21st October 2013 / page 2

MANUFACTURING & PROCESSING

Danish insulation giant Danish insulation giant Danish insulation giant Danish insulation giant Rockwool to invest Rockwool to invest Rockwool to invest Rockwool to invest PLN 280m in PolandPLN 280m in PolandPLN 280m in PolandPLN 280m in Poland

Danish insulation giant Rockwool has announced a PLN 280m investment program for its Polish produc-tion units in Cigacice (100km southwest of Poznań) and Małkinia (70km northeast of Warsaw). "The investments will encompass a full-scale modern-ization of the key manufacturing lines at our Polish factories, introduction of cutting-edge mineral wool production technology as well as additional environ-mental improvements. We plan to complete the streamlining by 2015, regardless of other smaller pro-jects that will be implemented at the same time," Rockwool Polska CEO Andrzej Kielar tells Poland To-day. To-date, Rockwool has invested close to PLN 1bn in Poland. In October last year the company embarked on a PLN 100m expansion of the Cigacice unit, where a new production line for Rockfon acoustic ceiling pan-els was added. The project were to create some 100 jobs in addition to estimated 1,000 staff the Danes em-ploy in Poland. A few weeks ago Rockwool broke ground on a new high bay warehouse at the site. To-gether with a new reception and offices for Rock-wool's logistics department, the project is to cost PLN 12.5m and reach completion by the end of this year. Bacl in 2011 the Danish giant acquired a Polish exter-nal façade solutions company Fast in a move to boost its competences in this booming segment of the Polish building insulation market.

The Cigacice site became part of the Rockwool group in 1993, when the Danes took over a local insulation manufacturer. With a staff of 730 it makes a range of mineral wool-based thermal insulation products. Overall, the two Polish Rockwool plants produce 400,000 tons of mineral wool per annum. Asked about the projected impact of the newly announced invest-ment program on future staff numbers and output of the Polish factories, Andrzej Kielar replies:

Rockwool employs more than 700 staff at the Cigacice plant. Photo: Rockwool

"At the moment, our new investments are aimed pri-marily at quality improvements rather than a capacity boost. We seek to make our products more accessible and competitive, offering category-leading quality even in the lowest price bracket. As a result, we will be able to make the entire Rockwool range in Poland, from hard roof and ceiling panels to soft loft insulation products, as well as reduce our environmental foot-print. As for the potential job creation, it is too early to tell, but we can definitely confirm that the investment itself will create huge opportunities for local contrac-tors whose services we intend to procure."

The Rockwool Group was founded in 1909, but in 1962 the owner families split the business in what is now Rockwool and the aeroconcrete maker H+H, both of which operate in Poland. Rockwool has been a brand since 1937 and from 1976 it is also the company name. With a head office in Hedehusene south of Copenha-gen, Rockwool has in excess of 9,800 employees in more than 40 countries. In 2012 the Group generated sales of DKK 14.7bn. The company is listed on the NASDAQ OMX Nordic Exchange Copenhagen, but the founding Kähler family's Rockwool Foundation is the largest shareholder with 23% of the shares. Chairman of the supervisory board is former CEO Tom Kähler.

DATA BOX: INDUSTRIAL OUTPUT

Poland's industrial output increased by 6.2% y/y and

by 9.6% m/m in September, statistics office GUS said.

Seasonally adjusted industrial output grew by 5.0% y/y

and by 1.4% m/m. The figure was slightly lower than

average projections as analysts surveyed by the Polish

Press Agency had expected industrial production to

increase by 7.0% y/y and by 10.5% m/m in September.

Production in the construction sector fell by 4.8% y/y

and increased by 9.4% m/m in September, GUS said.

Industrial output & producer prices

-12%

-8%

-4%

0%

4%

8%

12%

Jan

12

Mar

12

May

12

Jul

12

Sep

12

Nov

12

Jan

13

Mar

13

May

13

Jul

13

Sep

13

Industry output, y/y change

Producer Price Index, y/y change

Source: GUS, the central statistical office


MANUFACTURING & PROCESSING

Germany's Bilfinger Germany's Bilfinger Germany's Bilfinger Germany's Bilfinger group acquires Polish group acquires Polish group acquires Polish group acquires Polish filter maker ELWO, filter maker ELWO, filter maker ELWO, filter maker ELWO, wins new contractswins new contractswins new contractswins new contracts

Bilfinger Power Systems, subsidiary of the German engineering & services company Bilfinger SE, has ac-quired Polish flue gas cleaning specialists ELWO, which designs, produces and installs of electrostatic precipitators and bag filters for conventional power plants. The transaction price has not been disclosed. Founded in 1924 in Pszczyna (Silesia), Fabryka Elektrofiltrów ELWO went bankrupt in 2008 and three years later it was acquired from the receiver by Polish entrepreneur Ryszard Szajter, who turned the business around before selling in on to Bilfinger Power Systems. As of September, its order book was worth some PLN 100m and the company employed 200 staff. "The know-how of ELWO's flue gas cleaning special-ists and its unique machinery fit perfectly into our portfolio," said Gerd Lesser, CEO of Bilfinger Power Systems GmbH. "Hence, we are in a position to pro-vide an even more comprehensive offer to our cus-tomers in the area of flue gas cleaning and to expand our local power plant services in Poland." "Together with Bilfinger Power Systems, we are well positioned to serve the Polish lignite power plants market. With the future utilization of the joint sales networks and a stronger involvement in larger pro-jects we expect a dynamic organic growth of ELWO," commented the latter's Managing Director Dariusz Kowzan.

Upgrading Polish power plants Members of the Bilfinger Berger Group have been awarded a number of lucrative retrofit contracts in Po-land's power industry in recent years. In September, the Würzburg-based Babcock Noell GmbH and Bilfinger Infrastructure SA jointly won a EUR 120m contract for the retrofit of three flue gas desulfuriza-tion units. The latter will be designed for the lignite and biomass fuelled units 4, 5, and 6 of the Turów plant in Bogatynia and will be put in operation by the end of 2015. All major components are to be provided by Babcock Noell GmbH, with the Warsaw-based Bilfinger Infrastructure SA being responsible for the construction work for the foundations and buildings including their inner installations and the gypsum storage for the flue gas cleaning units. In the middle of July Babcock Borsig Steinmüller GmbH, a subsidiary of Bilfinger Power Systems GmbH, won a EUR 78m contract for the moderniza-tion of boiler 2 at the Bełchatów power plant. Boilers 3, 4 and 5 of Europe's largest lignite-fired power plant have already been modernized by Babcock Borsig Steinmüller GmbH. The modernization of boilers 7 to 12 is currently also being carried out in cooperation with further subsidiaries of the Bilfinger Power Sys-tems Group. As in the previous units, the work on boiler 2 aims at extending their service life, boosting efficiency and performance as well as reducing emis-sions. The delivery date is January 2016. In both cases the client was Poland's top energy utility PGE which operates mainly lignite & hard coal-fired power plants stations, even though recently it has made some moves towards the development of natural gas-based and renewable energy sources as well as nu-clear power. PGE is heavily investing in environmen-tally friendly equipment and in the modernization of its power stations.

With a workforce of 9,800 staff, the Bilfinger Power Systems is a subgroup of the engineering and services company Bilfinger SE. Numerous German and interna-tional companies operate under the Power Systems umbrella, which concentrates on the power generation sector. Headquartered in Mannheim, Bilfinger Berger is a multinational German company specialized in civil & industrial construction, engineering and related ser-vices. In the recent years it has participated in many key infrastructure development projects in Poland. With approximately 60,000 employees globally, the company turned over EUR 8.6bn last year.

BANKING & FINANCE

Alior's shares plunge Alior's shares plunge Alior's shares plunge Alior's shares plunge after KNF enforces after KNF enforces after KNF enforces after KNF enforces stricter bookkeepingstricter bookkeepingstricter bookkeepingstricter bookkeeping

One of Poland's top lenders, Alior Bank, saw its share price tumble more than 20% on Friday, 18th October, after the bank announced that due to adoption of new bookkeeping rules its Q3 results would be lower by some PLN 105m than previously expected. The bank bowed down to pressure from Polish financial markets regulator KNF, which asked banks to introduce more conservative bookkeeping on bancassurance products. "The core of the problem is optimistic bookkeeping," says Michał Kisiel, analyst with financial portal Bankier.pl. "The KNF told banks as early as March how to handle bancassurance products. According to the regulator, as long as there is a risk a client may pull out of a policy, revenues from such products should be booked in stages, and spread out over the entire contract period."


Shares in other major banks, which had gained in val-ue in the past weeks, likewise dropped slightly amid investor concerns that the bookkeeping issue might not be limited to Alior alone. According to experts, such one-time share price corrections are of little sig-nificance to the clients of the affected banks, but may temporarily shake up the sentiment among WSE in-vestors. In the long run, the new and improved bookkeeping regulations should contribute to greater transparency and reduced risk in the banking sector. Alior Bank hit the Warsaw Stock Exchange in Decem-ber last year in what was the largest ever IPO by a pri-vate company on the Warsaw bourse. Of the total PLN 2.1bn worth of receipts, some PLN 700m represented new equity, whereas the remainder was cashed in by Alior's main shareholder Carlo Tassara, whose lend-ers started pressurizing the company in late 2012 to reduce its huge debts. Carlo Tassara was established by Franco-Polish billionaire Romain Zalewski, who in-jected some EUR 450m into the Polish start-up. Founded shortly after the 2008 collapse of US invest-ment bank Lehman Brothers, in less than four years Alior created Poland's third largest branch network and started generating profits. Under the management of Wojciech Sobieraj, one of the wunderkinds of Polish banking, Alior introduced a number of innova-tions targeting the young and "interconnected" (for in-stance mobile bank Alior Sync) as well elderly as con-servative (by enabling clients to pay household bills commission-free). In 1H 2013 Alior's net earnings came to PLN 171.8m, up 29% y/y. Total operating income generated by the bank as at the end of June 2013 increased by 23.4% y/y to PLN 790.5m, and its cost/income ratio reached 51.7%, down by 10.7% from June 2012. The value of loans extended to customers by Alior Bank reached PLN 17.7bn as at the end of 1H 2013, and the deposit base reached PLN 19.1bn. This marks a 43.6% and

40.2% increase, respectively, as compared to the cor-responding period of the previous year. The loan-to-deposit ratio at 93% remains one of the lowest in the market. In January-June Alior's customer base grew by 253,000 reaching 1.7m in mid-2013.

BANKING & FINANCE

Polish bankers Polish bankers Polish bankers Polish bankers lobbying for easier lobbying for easier lobbying for easier lobbying for easier access to mortgageaccess to mortgageaccess to mortgageaccess to mortgage----backed bondsbacked bondsbacked bondsbacked bonds

A group of Polish bankers have drawn up a recom-mendation on abolishing barriers for mortgage bank-ing development and intend to send it to the Finance Ministry and Justice Ministry, according to the daily Rzeczpospolita. The recommendation, which seeks to pave the way for the introduction of mortgage-backed securities and asset-backed bonds to the Polish mar-ket, was reportedly sent for consultation to all banks last week. The introduction of mortgage-covered bonds would allow banks to improve their long-term liquidity, thus meeting new standards set by the Basel Committee, Andrzej Reich of the financial market watchdog KNF said during the recent Retail Banking Congress. Com-mercial banks in Poland keep mortgages on their own books and have no easy legal means of securitizing the exposure. Although mortgage-backed securities have played a controversial role in the global financial crisis, the bankers as well as many experts, believe they could provide Polish banks with better access to long-term financing and lower borrowing costs, especially for the

banks that are heavily involved in mortgage lending. If mortgage-covered bonds financed only 20% of the mortgage portfolio, it would translate into issuance of PLN 50-60bn of such papers, significantly increasing sector stability and releasing capital, bankers say. Polish banks have limited access to long-term financ-ing, which means that in the case of mortgage lending they are forced to finance long-term loans through short-term securities. Creating a market for bonds, in-cluding those backed by assets, could remedy the situ-ation to some degree. According to earlier reports, the regulator would like to see these instruments traded on the Warsaw bourse's bond market Catalyst after is-suers meet strict regulatory requirements promoting transparency, liquidity and proper guarantees. Back in 2011 the regulator said it was working on the legal framework necessary for such instruments to be in-troduced in Poland, but little has been done since. At the moment only two banks in Poland are licensed to fund their activities via mortgage-backed securities. One of them belongs to the German-owned BRE Bank, which conducts its business under the mBank and Multibank brands. BRE was one of the biggest Polish players offering mortgages denominated in for-eign currency before the global financial crisis dragged down Poland's złoty currency and made refinancing of loan portfolios much more difficult. BRE had in large part relied for foreign currency on its German parent Commerzbank, which itself got into financial trouble due to poor investments and had to tap the German government for aid. In a recent statement BRE Bank said it would direct 30% of its retail mortgage sales through a mortgage subsidiary in an attempt to double sales as it funds retail mortgages with mortgage-backed bonds. So far, BRE Bank's mortgage unit (BRE Bank Hipoteczny) has been focused on commercial real estate. As of end June 2013, its mortgage covered bonds amounted to PLN 1.85bn and were secured by a cover pool of PLN 2.5bn of assets.


"We have strong conditions and sufficient experience to successfully implement a new financing tool," BRE Bank's VP and retail banking chief Cezary Kocik was quoted saying, citing PLN 80m in monthly sales in Q2 and an NPL ratio at 1.9%. At the end of last year, foreign currency home loans, mainly in Swiss francs, accounted for 55% of mortgage portfolio of Polish banks, which had a total value of PLN 319.5bn. Foreign currency mortgages now ac-count for only 1% of new home loans, with only the af-fluent standing a chance of getting one. Various securitized bonds, like collaterized debt obli-gations and collaterized debt securities, gained ill fame in 2008-2009 as many blamed the complex and opaque papers for playing a pivotal role in the crisis that endangered the US and global banking sector and triggered a global recession.

ENERGY & RESOURCES

Italian contractors Italian contractors Italian contractors Italian contractors break ground on break ground on break ground on break ground on wastewastewastewaste----totototo----energy plant energy plant energy plant energy plant in Bydgoszczin Bydgoszczin Bydgoszczin Bydgoszcz

Italian contractors Astaldi Group and Termomeccanica Ecologia have broken ground on a EUR 130m treatment plant that will transform solid waste from the Bydgoszcz and Toruń area into elec-tricity and heat. According to schedule, the project is to be fully operational from 2016 with a workforce of some 60 full-time employees. The Bydgoszcz project is one of several high profile contracts Italy's Astaldi has won in Poland in recent years.

Under an engineering, procurement and construction agreement (EPC) signed last year, Astaldi and Termomeccanica are to design and build a waste-to-energy facility consisting of two incineration lines with a total throughput of 180,000 tons of municipal solid waste per year, with an installed power genera-tion capacity of 13 MW, corresponding to an annual electricity production of 100,000 MWh, meeting the needs of 50.000 families. In addition, during winter time, 30 thermal MW will enter the local district heat-ing network, keeping warm an estimated 3,000 fami-lies. As part of the project the contractors are to build a station for receiving the waste, as well as a compost-ing facility.

Bydgoszcz's thermal treatment plant will be able to process up to 180,000 tons of waste per annum. Photo: MKUO ProNatura

The investment was commissioned by Międzygminny Kompleks Unieszkodliwiania Odpadów ProNatura, a company established by the Bydgoszcz municipality to manage urban waste. The project is part of a broader EU-funded initiative that calls for development of waste-to-energy facilities in key Polish metropolitan areas. In Bydgoszcz's case, the EU contribution repre-sents some 60% of the total capex, with a loan from the environmental protection fund NFOŚiGW repre-senting a further 38%.

Bydgoszcz is one of six major Polish cities that suc-ceeded at taking development of waste incineration plants to the building permit stage and beyond. Per-haps the best known example is Poznań, which is im-plementing the project in a public private partnership formula. The Poznań contract was awarded to SITA Zielona Energia (an SPV of SITA Poland, subsidi-ary of France's SUEZ Environnement, and Margue-rite Waste Poland, owned by the Marguerite Fund). The Białystok thermal plant will be developed under the design & build formula by the Spanish-owned Polish construction giant Budimex and its consortium partners Belgium's Keppel Seghers and Spain's Cespa Compania Espanola de Servicios Publicos Auxiliares.

Farewell to landfills Planned throughput of thermal treatment plants in '000 tons

0

25

50

75

100

125

150

175

200

225

250

Konin

Bialystok

Szczecin

Bydg/Torun

Krakow

Poznan

Source: Municipalities, PT archives

A couple of years ago Astaldi, which besides Italy, op-erates in the Americas, Midle East, Maghreb and Tur-key, made Central Europe one of its target markets, with a particular focus on Poland. Their flagship pro-jects in the country include the central section of Line 2 of the Warsaw underground (EUR 800m), the War-saw-Łodź railway line and the Łodź Fabryczna station (EUR 350m), the Piotrków-Trybunalski section of na-tional road NR-8 (EUR 350m), as well as the Mińsk Mazowiecki bypass.


Earlier this year the company was awarded a EUR 72m contract for modernization and expansion of the John Paul II International Airport Kraków-Balice, which is to boost the latter's capacity to reach 8m pas-sengers annually as well as a EUR 50m order for the construction of a railway link between Krakow Cen-tral Station and the airport.

Six plants to cost PLN 3bn Estimated cost of thermal treatment plants in PLNm (project value)

0

100

200

300

400

500

600

700

800

Kielce

Bialystok

Konin

Bydg/Torun

Poznan

Kraków

Source: Municipalities, PT archives

Specializing in large infrastructure projects, Astaldi has been listed on the Italian Stock Exchange since 2002. The company ended 2012 with an order backlog of over EUR 10bn, a turnover of EUR 2.5bn, EBITDA of over EUR 264m, and net profit of over EUR 74m.

ENERGY & RESOURCES

Six Six Six Six out out out out of Europe's of Europe's of Europe's of Europe's tentententen most polluted cities are most polluted cities are most polluted cities are most polluted cities are in Poland, in Poland, in Poland, in Poland, sayssayssayssays EEAEEAEEAEEA

Poland, the host of this year's U.N. Framework Con-vention on Climate Change (UNFCCC) talks, has the second-dirtiest air in Europe, according to a new re-

port by the European Environment Agency (EEA). In 2011, six out of the top 10 most polluted cities in Eu-rope were in Poland, with Kraków experiencing 150.5 days each year above the EU's target levels for air pol-lution. Other cities in the top ten are Nowy Sącz, Gli-wice, Zabrze, Sosnowiec and Katowice – all situated in the industrial heartland of Silesia. The study, published last week, found Poland ranked just below Bulgaria in concentrations of fine particu-late matter, pollutants that form when emissions from power plants, industry and cars react in the air. Poland also had the highest levels of benzo(a)pyrene (BaP), a carcinogenic hydrocarbon that's found in coal tar and also comes from wood burning and car exhaust. BaP is a growing problem in Europe, "especially in areas where domestic coal and wood burning is, or becomes more common," according to the report. Despite pressure from the EU to cut down carbon emissions, Poland remains defiant as coal-fired power plants continue to generate some 90% of its electricity. Poland is Europe's leading producer of coal, whereas most of the remaining hydrocarbons, such as oil and gas, the country imports from Russia, which has re-peatedly tampered with these energy supplies to "dis-cipline" its Communist-era ally. Although Poland has made huge progress as far as development of renewa-ble energy sources is concerned, it is bound to remain dependent on coal for decades. In fact, a growing number of state-backed investors are contemplating construction of new coal-fired power plants in Poland. Ironically, besides hosting this year’s UNFCCC talks, Warsaw is also the site of the World Coal Association’s International Coal & Climate Summit, which will be held alongside the UN talks. It should be noted, however, that Poland's energy in-dustry has cleaned up its act to a large degree and ad-vanced filtration systems have been installed at all key power plants, resulting in a significant reduction in the

most harmful emissions. However, environmental awareness in the nation remains low and domestic coal and wood burning remains common in the cities, whereas most Polish vehicles would probably fail ex-haust emissions tests in Western Europe.

Europe's most polluted cities Average number of days in 2011 when particulate concentrations ex-

ceeded the EU target*

100 120 140 160 180

Katowice (PL)

Sosnowiec (PL)

Zabrze (PL)

Gliwice (PL)

Nowy Sącz (PL)

Dobrich (BG)

Pleven (BG)

Kraków (PL)

Plovdiv (BG)

Pernik (BG)

*) EU targets state pollution limits should not be exceeded more

than 35 days a year.

Source: European Environmental Agency

But Poland’s not the only European country to strug-gle with air pollution. Despite massive cuts in emis-sions of polluting chemicals, over 90% of European city dwellers are exposed to dangerous levels of air pollution, according to the report. The EU is in the process of reviewing its current air pollution policies, and EEA director Hans Bruyninckx said Europe must do more to reduce the levels of air pollution that are still high in Bulgaria, Poland and other European countries like Slovakia and the Czech Republic. "Large parts of the population do not live in a healthy envi-ronment, according to current standards," Bruyninckx said. "To get on to a sustainable path, Europe will have to be ambitious and go beyond current legislation."



UBM gets permit for UBM gets permit for UBM gets permit for UBM gets permit for Wrocław office projectWrocław office projectWrocław office projectWrocław office project

Austrian developer UBM has obtained a building per-mit for its newest development in Poland, the Times II office project on Kazimeierz Wielkiego St. in Wrocław's Old Town. The LEED-certified investment will comprise two buildings offering total 18,000 sq.m of office space, 2,500 sq.m of retail space and 370 park-ing places in multi-storey partially public parking lot. UBM acquired the 0.53ha site from the municipality in October last year. The company has recently complet-ed the mandatory archeological excavations, hoping to begin construction of Times II and the break of the year and complete the project some 20 months later. "We are expecting the delivery in Q3 2015," Peter Obernhuber, member of UBM's board, tells Poland Today. "It is not our intention to break the project up into stages. Even if this proves necessary due to the construction site's difficult logistics, the time span be-tween the potential two stages should be marginal." According to Cushman & Wakefield the office vacancy rate in Wrocław increased by 4.4 percentage points in 1H 2013, reaching 12.4% (see box). "The market is difficult but we believe that the Times II project stands out due to its location and very high building standard. Therefore, we do not think that the relatively high vacancy rate in Wrocław will apply to this particular investment," says Mr. Obernhuber. The Austrians are also working on a 14-storey Alma Tower building in Kraków, which is to reach comple-

tion in May 2014 with 10,000 sq.m of class A offices and 175 parking spaces (including 149 underground). The project is situated on Pilotów St., in the vicinity of Młyńskie Roundabout, about 2 km from Kraków's main train and bus station and 4km from the city cen-tre. The entire investment is worth more than PLN 100m and the general contractor is the Polish subsidi-ary of Austria's PORR.

Times II will be sandwiched between existing build-ings in Wrocław's Old Town. Image: UBM

The building's first and largest tenant will be the listed Polish retailer Alma Market, best known as the oper-ator of the upscale Alma delicatessen and Krakowski Kredens regional specialty stores. Together with its sister companies Vistula Group and Krakchemia, Alma Market occupy 50% of the available floor space. The remaining offices are being commercialized by proper-ty consultancy Knight Frank. UBM's past projects in Kraków included Hotel Andel's, Hotel Radisson Blu, Hotel Park Inn and a res-idential investment Villa Galicja. Although besides Alma Tower the company is not working on any other projects in Kraków at the moment, they are gearing up for another office development there, UBM Kraków


unit's head Bartosz Pająk told Poland Today earlier this year. In Warsaw, UBM has recently completed phase two of its giant Poleczki Business Park, bringing the project's GLA up to 100,000 sq.m. Developed in cooperation with CA IMMO and located near Warsaw's Chopin airport, Poleczki Business Park is yet to double in size. The company is currently preparing for the LEED Gold-certified phase three of that development.

DATA BOX: WROCŁAW OFFICE MARKET IN 1H 2013

• With In H1 2013, the transaction volume in Wrocław’s

modern office market reached nearly 51,000 sq.m,

with new leases accounting for 43% of which pre-lets

account for over 50%. It represents nearly a threefold

rise on the leasing volume recorded in the same

period 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

compared 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

percentage 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


Irish firm BoxelderIrish firm BoxelderIrish firm BoxelderIrish firm Boxelder to to to to develop large office develop large office develop large office develop large office project in Rzeszówproject in Rzeszówproject in Rzeszówproject in Rzeszów

Irish-owned developer Boxelder seeks to build three office buildings with a combined GLA of 17,000 sq.m in Poland's southeastern city of Rzeszów. At a recent presentation to the Rzeszów town hall, the project should attract business process outsourcing operators to the city, resulting in the creation of up to 1,500 jobs. The Rzeszów-based Boxelder owns a handful of sites in the city, but its most ambitious project to-date, the PLN 80m complex of three buildings, will be located on a 7,000 sq.m plot of land at Kustronia St., near the district court building. However, according to local zoning plan, the whole area is designated for public administration, healthcare, and education facilities. The Irish investors are hoping the prospect of hun-dreds of new jobs to be created will convince the city councilors to alter the plan and enable commercial de-velopments in this section of Rzeszów. The property consultancy Colliers has recently listed Rzeszów among Poland's 10 upcoming BPO/SSC loca-tions. The other "rising stars" named by Colliers are Zielona Góra, Olsztyn, Białystok, Gliwice, Kielce, Toruń, Radom, and Lublin. As the competition be-tween outsourcing BPO/SCC employers in key re-gional cities, such as Kraków, Wrocław, TriCity and Poznań, is affecting wage levels and draining the local talent pool, offshoring companies are looking to enter uncharted territories, and with its student population of 40,000 Rzeszów ranks pretty high among those new destinations. According to Colliers, the current

office stock in Rzeszów barely exceeds 40,000 sq.m with rents at EUR 8.5-11 per sq/m/month.

Boxelder may have a hard time convincing Rzeszów's city council to alter the local zoning plan. Image: Boxelder

Although foreign developers prefer to play it safe, in-vesting primarily in the tried and tested locations, lo-cal companies in regional cities often end up being first to benefit from the outsourcing boom. Rzeszów-based DevelopRes is ready to build two office towers (16,000 & 25,000 sq.m) as part of a large SkyRes com-plex that includes also four apartment blocks. They will be Rzeszów's first class-A offices, and the devel-oper is hoping its top quality project will attract inter-national BPO operators to the city, which has recently lost a major project from Goodyear due to lack of suitable office space. The tire maker reportedly had sought to create some 1,000 in Rzeszów. According to DevelopRes, SkyRes will be able to accommodate some 2,500 staff.



WRF: Warsaw's WRF: Warsaw's WRF: Warsaw's WRF: Warsaw's modern office stock modern office stock modern office stock modern office stock exceeds 4m sq.m in Q3exceeds 4m sq.m in Q3exceeds 4m sq.m in Q3exceeds 4m sq.m in Q3

The total stock of modern office space in Warsaw reached 4.071m sq.m as of end of Q3 2013, according to the Warsaw Research Forum, which groups together top property consultancies operating in the Polish cap-ital (CBRE, Colliers, Cushman & Wakefield, DTZ, Jones Lang LaSalle, Knight Frank and Savills), During the first three quarters of 2013, the Polish capi-tal's office stock surged by 246,400 sq.m with 94,300 sq.m being added in Q3 2013 alone. Out of 15 office schemes completed since the beginning of the year, only two were located in the central part of Warsaw (Plac Bankowy: 3,700 sq.m and Chmielna 25: 4,300 sq.m). Most of the new office space (45%) was deliv-ered in the Upper South zone (Mokotów). The largest schemes completed in Q1-Q3 2013 were Konstruktorska Business Center (48,300 sq.m), Miasteczko Orange (43,700 sq.m) and Marynarska 12 (40,000 sq.m). The relatively high supply of new projects contributed to an upswing of vacancy rate in Warsaw from 8.8% at the end of 2012 to 10.9% at the end of Q3 2013. Vacan-cy rate in the City Centre at 10.5% was lower than in non-central locations (11.1%). Gross take-up in Q1-Q3 2013 totaled 518,600 sq.m, which is 14% higher in comparison to the corresponding period of 2012. The largest volume of office leasing activity was registered in the Upper South zone (183,300 sq.m). Gross take-up in the City Centre amounted to 109,100 sq.m. Accord-ing to WRF, lease extensions and renegotiations repre-

sented some 26% of total take-up were whereas pre-leases accounted for 37% of letting activity. The largest deals in Q3 2013 include the lease of over 22,000 sq.m by Polkomtel in the building located at Konstruktorska 4, the owner occupation of Wola Cen-tre by Getin Group (18,900 sq.m) and the pre-let of BZ WBK (11 800 sq.m) in Skanska's Atrium One.

CONSUMER GOODS & RETAIL

Kraków's BIK joins Kraków's BIK joins Kraków's BIK joins Kraków's BIK joins ranks of ranks of ranks of ranks of smallsmallsmallsmall----town town town town retail park developersretail park developersretail park developersretail park developers

Kraków-based developer Biuro Inwestycji Kapitałowych (BIK), which has so far specialized mainly in industrial properties, is embarking on its se-cond retail project in the Silesian town of Dzierżoniów (50km south of Wrocław). Scheduled to open in Q3 2014, the Galeria Dzierżoniów strip mall will feature 25 retail & service units with a combined GLA of 5,000 sq.m as well as 105 parking spaces. Located in the centre of the city, right next to a Netto discount grocery, Galeria Dzierżoniów seeks to attract a diversified tenant mix, including a drugstore, electri-cals & sports goods outlets, fashion retailers, and res-taurants, representing both domestic and international brands. The developer estimates the mall's immediate catchment area at some 75,000 inhabitants. "We analyzed Dzierżoniów in terms of population and purchasing power and we looked into the its direc-tions of development. The site for Galeria Dzierżoniów was chosen due to its central location, near the railway and coach stations as well as the his-toric old town. As the first modern retail project in

Dzierżoniów we offer attractive lease terms to our tenants and we are confident future sales turnover will confirm they made the right choice," said BIK's CEO Mirosław Koszany.

Galeria Dzierżoniów will be the town's first modern shopping center. Image: BIK

Dzierżoniów is home to a number of manufacturing plants that take advantage of investment incentives under the Wałbrzych special economic zone INVEST-PARK, including chemical, textile, and machinery producers. With a population of 35,000, the town is a regional transit hub. Backed by Polish capital, BIK has been developing lo-gistics properties since 2000 and its current portfolio includes some 85,000 sq.m of commercial space in Kraków, Ożarów Mazowiecki, Pruszcz Gdański, Sos-nowiec, Chorzów, and Puławy. In 2010 the company decided to diversify into retail properties and medical facilities. Last year it opened a 2,700 sq.m strip mall Park Puławy, anchored by Biedronka, Media Expert PEPCO, and Drogeria Aster, and in 2011 completed a 3,500 sq.m elderly care unit in Chorzów. Besides Galeria Dzierżonów, its retail project pipeline includes also Retail Park Bielsko in Bielsko-Biała.


SERVICES & BPO

Polish hotel market Polish hotel market Polish hotel market Polish hotel market to remain buoyant to remain buoyant to remain buoyant to remain buoyant as investor aas investor aas investor aas investor attention ttention ttention ttention zones in on CEEzones in on CEEzones in on CEEzones in on CEE

The volume of hotel investment activity in 2013 has surged within the EMEA region, increasing by 38% in 1H 2013 as compared to the same period in 2012. This increase is mostly led by major portfolio and single as-set transactions occurring especially in Western Eu-rope. However, with reducing acquisition opportuni-ties in main Western European cities, investors are now showing renewed interest in the Central Europe-an key gateway cities, according to Cushman & Wakefield, the world’s largest privately held real es-tate advisor. Poland recently saw the sale of the 3-star, 288-room Mercure in Zakopane, and the Czech Republic of the 5-star, 124-room Palace hotel in Prague. According to Cushman & Wakefield estimates another two 5-star and two 4-star hotels in the Czech Republic, one 5-star hotel in Hungary and at least one 5-star hotel in Po-land are expected to change owners in the next six months. "While Poland is now regarded as the key investment market within the region, we are also seeing interest from investors for prime hotel properties in Prague and Budapest," says Frédéric Le Fichoux, head of Cushman & Wakefield’s CEE Hospitality Team. Improved investor sentiment for the Central European region follows a continual growth in trading with RevPAR (revenue per available room) levels for the

first half of 2013 still up in Bratislava (10.7%), Buda-pest (8.4%) and Prague (2.4%) compared to the same period last year. Warsaw saw a surge in performance in 2012 due to the UEFA European Championship and is now undergoing a period of correction with RevPAR levels understandably lower than 2012. "As the domestic market fuels growth, trading is ex-pected to recover in Warsaw in Q4 2013 and Q1 2014," says Sarka Chapman, Consultant Hospitality for the CEE region and Cushman & Wakefield. Limited development activity in the region has further contributed to the increase in performance of existing hotels. Investors are now focusing on purchasing in-come producing assets as they are typically sold below replacement costs. The limited availability of bank fi-nancing for development projects, higher costs and additional risk bearing is further pushing investors to focus on existing hotels rather than development pro-jects. Poland remains an exception to this trend as several new hotels continue to open including the Doubletree by Hilton in the Wawer district of Warsaw and the Renaissance Chopin airport hotel, both due to open by the end of 2013. The market is expected to remain buoyant in terms of new hotel developments as War-saw, Łódź, Poznań and Wrocław offer several oppor-tunities, especially in the economic and mid market segments. Prague has seen a very limited number of hotel open-ing over the past three years and the only substantial hotel openings are in the budget and midscale segment with the recent opening of the B&B hotel in 2013 and the planned Motel One in summer 2014. Although several other hotel projects still exist within these cit-ies, the lack of financing and a difficult political cli-mate have resulted in a significant reduction of planned openings in the coming years. Since the open-

ing of the 5-star Buddha Bar and 4-star Park Inn by Radisson, Budapest has seen no substantial hotel openings. Bratislava had no hotel opening in 2012 and the 4-star Linder hotel was the only hotel opening in 2013. "As the European economy recovers and interest in hotel investments increases, we expect greater trans-action activity within the Central European region in 2014," says Frédéric Le Fichoux.

SERVICES & BPO

Finnish Kemira picks Finnish Kemira picks Finnish Kemira picks Finnish Kemira picks Alchemia for Alchemia for Alchemia for Alchemia for Gdańsk Gdańsk Gdańsk Gdańsk service delivery centreservice delivery centreservice delivery centreservice delivery centre

Last month, when we first wrote about the Gdańsk outsourcing project by Finnish chemicals giant Kemira (see PT Business Review+ No. 002 page 9), company representatives were still tightlipped on the final location of their shared services centre. Things have been moving fast since, however, as in early Oc-tober Kemira inked a 7-year lease for 2,600 sq.m of of-fices space in Gdańsk's Alchemia complex. The Finn-ish company, which seeks to create some 200 jobs in Gdańsk by the end of next year, will occupy two floors at one of Alchemia's two office towers. Kemira chose Alchemia following a nine-month selec-tion process. According to Sławomir Gajewski, CEO of Torus, the developer behind Alchemia, by early 2014, when phase one of the office park is scheduled to reach completion, some 70% of available space will have been pre-leased. Alchemia's first two towers have a combined GLA of 21,651 sq.m, including 16,700 sq.m of offices as well as a 4,500 sq.m sports complex with a swimming pool, fitness centre, and a range of addi-


tional amenities. Overall, the complex, located at the intersection of Grunwaldzka Avenue and Kołobrzeska St., is to include seven buildings.

Kemira is to remain in Alchemia for at least 7 years.. Photo: Torus

"Alchemia not only fully satisfies our office needs, but also reflects Kemira's philosophy. We paid attention to such details as LEED certification and eco-friendly approach which also represent Kemira"s values," commented Arek Rochowczyk, Managing Director & Head Business Service Center EMEA. Over the past month employment at the Gdańsk cen-tre, which provides bookkeeping, customer service, purchasing, HR & payroll, and IT services to Kemira operations in the EMEA region, has doubled and cur-rently it includes 60 professionals. "Our year-end goal is 100 staff," Maja Paradecka, HR, Kemira Business Center EMEA, told Poland Today. Kemira is a global chemicals company serving custom-ers in water-intensive industries, such as pulp & paper, oil & gas, mining and water treatment. Last year Kemira turned over EUR 2.2bn and their financial tar-

gets for 2016 are EUR 2.6 - 2.7bn in revenue with an EBITDA margin of 15%. Its global workforce totals 4,900 employees. Besides the Gdańsk center Kemira's Polish workforce totals some 130 employees including 70 at the Kemipol units in Police near Szczecin and Wrocław, 50 at the Kemira plant in Świecie as well as a small team in Ostrołęka. By relocating its back office operations to Gdańsk, the company hopes to save up some EUR 10m annually. The plan to establish a Busi-ness Service Center impacts up to 210 current posi-tions in the EMEA region, of which up to 80 are in Finland, Kemira said.


Regulator greenlights Regulator greenlights Regulator greenlights Regulator greenlights Lotos and BP's aviation Lotos and BP's aviation Lotos and BP's aviation Lotos and BP's aviation fuel joint venturefuel joint venturefuel joint venturefuel joint venture

The European Commission has given its blessing for tighter cooperation between Air BP, the aviation fuel services division of BP, and Poland's number two re-finer Grupa Lotos. Their new joint venture, Lotos-Air BP Polska, will be formed by Air BP buying 50% of Lotos Tank, the wholly owned aviation subsidiary of Grupa Lotos. Air BP and Lotos will be equal share-holders in the company, which will manage the sup-ply, logistics and marketing of aviation fuel in Poland. Initially Lotos – Air BP Polska will operate at Gdańsk (GDN), Warsaw (WAW) and Kraków (KRK) airports. Both partners are committed to significantly growing the presence of the new joint venture in the aviation fuel market in Poland. Lotos-Air BP Polska will lever-age Air BP's global customer relationships and tech-nical operations experience, as well as Grupa Lotos' local expertise and supply capability.

"We are always looking for new opportunities to grow the Air BP business. Poland is the country with the fastest growing aviation fuel sales in Europe and we have found a strong, local partner in Lotos," Air BP Chief Executive David Gilmour said back in June, when the joint venture agreement was signed.

Lotos Tank is changing name to Lotos-Air BP Polska, to emphasize its new ownership structure. Photo: Grupa Lotos

"Our key objectives for the near future will be to inte-grate with Air BP's sales and operations units, develop sales at Polish airports as well as to enter new airports, which will require investment in equipment, staff training and logistics," Artur Warsocki, CEO of Lotos Tank tells Poland Today. "Our cooperation with Air BP foresees also expansion to foreign airports, but it is too early to speak of any specifics at the moment." A few years ago Grupa Lotos teamed up with Norway's Statoil Fuel & Retail in the aviation fuel segment, but that cooperation ended in mid-2012, according to Mr. Warsocki. The 2013 has been an important year for Lotos Tank, as the company managed to under-mine the monopoly of its key competitor PKN Orlen by launching aircraft refueling services at Warsaw Chopin Airport, and Kraków's John Paul II airport. The company, which operates also at the Gdańsk air-port and supplies fuel to the airports in Wrocław and Rzeszów that handle the refueling themselves, seeks


to expand to Katowice (KAT) and Warsaw-Modlin (WMI) in the near future. In 2012, the Grupa Lotos S.A. refinery in Gdańsk produced over 500,000 tons of aviation fuel.

Top five chains control 51% of market Poland's leading petrol station operators, no of units

2009 2010 2011 2012 Q1'13 share

PKN Orlen 1,747 1,714 1,756 1,767 1,766 26.1%

Shell 379 381 375 376 *479 7.1%

BP 384 402 424 446 453 6.7%

Grupa Lotos 327 324 369 405 405 6.0%

Statoil 291 308 349 356 357 5.3%

*) including 105 locations acquired from Neste

Source: POPIHN

"Through the Lotos - Air BP Polska joint venture we are establishing a significant presence in Poland. We will now be able to provide our commercial airline customers with aviation fuel through our newly formed joint venture when they fly to Poland, and we will expand our general aviation network by enabling customers to use their Air BP Sterling card at all the joint venture’s new locations," said Alexander Junge, Performance Unit Leader Northern & Central Europe, Air BP. BP is the leading foreign fuel retailer in Poland with a network of more than 455 stations. The company has invested more than USD 1bn in Poland since 1991 and last year its Polish unit turned over PLN 13.5bn. BP en-tered the aviation fuel business in the mid-1920s and currently fuels more than 8,700 flights every day. Air BP is the aviation services division of BP and markets aviation fuels and specialist products around the world. Air BP has a network of operations at around 600 locations in over 45 countries and sells over seven billion gallons of fuel a year.

Controlling approximately a third of Poland's fuel market, Grupa Lotos is the country's second largest company by revenue. The company operates in explo-ration, production and crude oil processing, as well as in distribution and sales of a wide range of petroleum products. Over the past year's the production capacity if its Gdańsk refinery has risen from 6 to 10.5m tons. In the first half of 2013 Grupa Lotos turned over PLN 13.3bn, 18% down y/y, and posted a net loss of PLN 273m, reflecting dropping margins and unfavorable economic conditions. Its retail network includes more than 400 petrol stations.


Poland may receive Poland may receive Poland may receive Poland may receive EUR 4.5bn from EU EUR 4.5bn from EU EUR 4.5bn from EU EUR 4.5bn from EU under new transport under new transport under new transport under new transport corridor programcorridor programcorridor programcorridor program

In what it dubbed "the most radical overhaul of EU in-frastructure policy since its inception in the 1980s," the European Commission has published new maps showing the nine major corridors which will act as a backbone for transportation in Europe's single market and revolutionize East–West connections. Two of the core routes, the Baltic-Adriatic Corridor and the North Sea-Baltic Corridor go across Poland. In the 2014-2020 budget perspective, EUR 26bn has been ear-marked for transport projects within these corridors, with EUR 11.3bn to be spent in the cohesion countries. According to EC sources, Poland may get some EUR 4.5bn from that pool for related infrastructure projects provided that the country applies for them in the next three years. If the projects are well prepared, financ-ing may even be higher.

These corridors will be supported by an extensive network of routes which will connect, according to the European Commission's plan 94 main European ports, 38 key airports, 15,000 kilometers of railway lines up-graded to allow for high speed travel and 35 cross-border projects. "The aim is to ensure that progres-sively, and by 2050, the great majority of Europe's citi-zens and businesses will be no more than 30 minutes' travel time from this comprehensive network," the EC wrote. In the Polish case most of the funding will be put towards modernization of railway routes as well as certain cross-border road links.

Two of European Union's nine core network corri-dors pass through Poland. Image: EC

"The new EU infrastructure policy will put in place a powerful European transport network across 28 Member States to promote growth and competitive-ness. It will connect East with West and replace to-day’s transport patchwork with a network that is genuinely European", the commission said. The core network, which according to the Commission is to "transform East West connections, remove bottle-necks, upgrade infrastructure and streamline cross border transport operations for passengers and busi-nesses throughout the EU" will be established by 2030. "It will improve connections between different modes


of transport and contribute to the EU's climate change objectives," it added.


MLP Group MLP Group MLP Group MLP Group boost boost boost boost equity to finance new equity to finance new equity to finance new equity to finance new warehouse projectswarehouse projectswarehouse projectswarehouse projects

Israeli-owned warehouse developer MLP Group, which has recently broken ground on its 5th Polish lo-gistic park, is hoping to raise gross PLN 90.6m from a share issue on the Warsaw Stock Exchange, which will support the company's ambitious investment pipeline. The issue price has been set at PLN 24. In the place-ment, MLP Group is offering 3.77m shares including 3.02m new C-series shares and 0.75 existing A-shares belonging to the current shareholder Cajamarca Holland, Dutch-based subsidiary of the Tel-Aviv-listed Israel Land Development Company Ltd. Following the offering, the latter's share in MLP Group will decrease below 57%, with new investors to acquire a 20.8% stake in the business. Subscription ended last week and are to be allocated to retail and institutional investors on October 22. At the moment, MLP Group owns more than 158ha of land in Poland, which according to the company will allow it to reach a target level of warehouse and pro-duction space of around 720,000 sq.m. Specializing in built-to-suit solutions, MLP earned PLN 57m last year on sales revenues of PLN 86m. Its asset portfolio was worth PLN 936m as of end of 2012, up from PLN 240m in 2006. In the first half of 2013, MLP Group signed new lease agreements covering a total of 48,000 sq.m of ware-

house and manufacturing space, with MLP Pruszków II being the company's fastest-growing park, following the completion of the 165,000 sq.m MLP Pruszków I (plot size: 43ha). In Poznań, MLP is developing ware-houses with a total area of approx. 102,000 sq.m (plot size: 19ha). Their MLP Tychy pro-ject in Silesia has been fully rented out. As of end of last year, nearly 300,000 sq.m of space at the company's Polish indus-trial parks was occupied and so far this year the figure has gone up by more than 50,000 sq.m.

Leased space at MLP's Polish parks in sq.m

0

50

100

150

200

250

300

350

2006

2007

2008

2009

2010

2011

2012

*2013

*) end of 1H (all data as of end of period)

Source: MLP Group

"Two of our five parks are almost fully leased out, but we can see enormous opportunities for further expan-sion in our other locations. At our Bieruń, Pruszków II and Poznań parks, approximately 400,000 sq.m of warehouse space may still be created. We plan to sup-plement our land bank with acquisitions of additional plots for the development of new logistics parks," MLP's board member Dorota Jagodzińska-Sasson told Poland Today last month, confirming the company's interest in the Wrocław and Upper Silesia regions. Their latest project, the 55,000 sq.m MLP Bieruń, lo-cated on a 11.5ha plot in the Katowice Special Econom-ic Zone, near the S1 expressway and the A4 motorway

intersection in Mysłowice, is currently under con-struction with phase one (22,900 sq.m) to be delivered in Q1 2014. The company's fastest-growing project is MLP Pruszkow II, which has attracted a number of tenants in the past few months. Located in the out-skirts of Warsaw, 5km from Pruszków, the park occu-pies a total of 67ha and will ultimately offer 302,000 sq.m of built up space. MLP said it would allocate some PLN 50m of proceeds from the equity boost to expansion of its existing parks (MLP Bieruń: PLN 15m; MLP Pruszków: PLN 25m; and MLP Poznań: PLN 10m) while a further PLN 23.5bn will be put towards acquisition of attractive in-vestment sites for new projects.

FOOD & AGRICULTURE

Kellogg's Kellogg's Kellogg's Kellogg's Kutno plant Kutno plant Kutno plant Kutno plant to launch production to launch production to launch production to launch production oooof savory snacks f savory snacks f savory snacks f savory snacks next next next next yearyearyearyear, , , , createcreatecreatecreate 100 100 100 100 jobsjobsjobsjobs

UMA Investments, subsidiary of US food giant Kel-logg gears up to launch production of savory snacks in Kutno (110km west of Warsaw). The Kellogg Com-pany became the world's number two savory snack producer last year with the USD 2.7bn acquisition of the Pringles snack business from FMCG giant P&G. Starting from next year, the Pringles snacks, which are now Kellog's 2nd largest brand after Special K, will be made also in Poland. "We are rolling out the production in the second half of 2014," Eugene Evans, who heads Kellogg's Polish operations, tells Poland Today. "We have already hired 50 people and we aim at doubling that number by next


summer. We are currently looking to hire highly skilled technicians in the Kutno region." UMA acquired the Kutno site in 2007 and completed a factory building of approximately 15,000 sq.m shortly after. The project had been sitting idle for nearly half a decade before Kellogg returned to Kutno in 2013 with new plans. In early 2013 the Łódz Special Economic Zone said UMA promised to invest a further PLN 225.8m (approx. EUR 54.8m) in the Kutno project that were to create a minimum of 40 new jobs. Company representatives explained the investment was for a 10,000 sq.m extension to the existing building which will contain a raw material area, process, packing and warehouse.

Stagnation in savory snacks Retail volume in '000 tons and retail value in EURm

2011 2012

'000

tons EURm*

'000

tons EURm*

Crisps/Chips 34.8 220.2 35.5 213.2

Puffed snacks 15.9 86.4 16.1 82.9

Nuts 10.8 47.6 11.0 46.1

Popcorn 1.1 4.2 1.1 4.1

Pretzels & sticks 24.7 70.3 25.0 67.4

Tortillas 0.4 3.7 0.4 3.7

Source: Euromonitor International *) at current prices

"We need to stay flexible and keep a certain capacity to adapt to business demand. We have decided to invest in savory snacks development, an area which offers a growth opportunity for our business," Mr. Evans ex-plains. "We are committed to make Kutno one of our top performing plants and we are investing according-ly." Prior to 2008 sales of savory snacks in Poland used to grow at a double digit pace, but market saturation and economic slowdown have since caught up with the

segment. According to Euromonitor International, in 2011 and 2012 the market contracted and the research company expects little improvement in the coming years. For instance, sales of crisps/chips in Poland to-taled EUR 213m in 2012 and in 2017 Eurominotor sees the figure at EUR 214m. Other analysts are slightly more optimistic. MarketLine expects the whole savory snacks category to reach EUR 497.1m and 117,500 tons in 2016, representing a growth by 27.6% in value terms and 15.2% in volume terms from 2011 levels. The seg-ment is dominated by global producers with PepsiCo, Lorenz Bahlsen Snack World (LBS) and InterSnack controlling some 77% of all sales, with PepsiCo alone boasting a 44% market share. As for breakfast cereals, which is what Kellogg is per-haps best known for, the segment is being estimated at some PLN 830m (excluding cereal bars) and its value has grown almost ten times over the past decade. By 2016 the figure is said to pass the PLN 1bn mark. Once considered children's food, cereals and muesli have since become a popular breakfast choice also for nutri-tion conscious adults. The key player in the breakfast cereal segment, with a nearly 50% share, is the Nestlé-General Mills joint venture CPP Toruń Pa-cific with brands such as Nestlé Corn Flakes, Nesquik, Chocapic, Cini Minis, Cookie Crisp, Cheerios and Nestlé Fitness. The number two place belongs to Polish food giant Maspex Wadowice, whose brands Mlekołaki, Lubella Corn Flakes represent less than 10% of the market. Roughly quarter of all breakfast ce-reals in Poland are being sold under private labels of retail chains. Tough competition has already once driven Kellogg's out of Poland where their cereals are currently not available. Asked whether the company has plans to once again try its luck on Central Europe's largest market, Eugene Evans replies: "The Polish market is a very attractive one and we are indeed looking into op-portunities to increase our presence here."

FOOD & AGRICULTURE

Sugar giant KSC to Sugar giant KSC to Sugar giant KSC to Sugar giant KSC to acquire acquire acquire acquire AgrosAgrosAgrosAgros----NovaNovaNovaNova's's's's Włocławek factoryWłocławek factoryWłocławek factoryWłocławek factory

One of Poland's leading producers of juice and vegeta-ble-based meals, Agros-Nova will sell its processing plant in Włocławek (140km north west of Warsaw) to Poland's leading sugar producer, the state-owned Krajowa Spółka Cukrowa (KSC) by the end of the year. The latter's newly created subsidiary Polskie Przetwory (Polish Preserves) has been renting the plant since 1st October and all of Włocławek's 119 staff have transferred to the new employer. This is very good news for the employees, who were told by Agros-Nova back in May that the plant would be shut down and its employees made redundant before the end of August. "The final staff numbers in Włocławek are likely to be higher once our investment program gets underway," Bogusław Mazur, spokesman at KSC, tells Poland To-day. "Initially the unit will focus on semi-finished products, for instance tomato concentrate, for B2B cli-ents, as well as contract manufacturing & private label production in the B2C channel. Besides ketchup and tomato concentrate the factory makes other types of vegetable preserves and it is strategically located very close to key vegetable production areas. Roughly a quarter of Poland's tomato, cucumber, and carrots are located in this region, which also has an impact on the plant's potential. We are working on our own brand for ketchup and other products and we can see huge prospects for Polskie Przetwory in health & conven-ience foods as well the private label segment."


As for Agros-Nova, the company will concentrate all vegetable processing operations in Łowicz, south of Warsaw. Following the divestment of its Włocławek unit, Agros-Nova will have three production plants in Poland, specializing in juices and beverages, fruit & vegetable preserves, ready-made meals and condi-ments. The company employs approximately 1,880 staff across the three locations and owns some of Po-land's most popular grocery brands, including Łowicz, Fortuna, Garden, Tarczyn, Krakus, Kotlin, Pysio Dr Witt, and Włocławek. The latter is to remain with Agros-Nova despite the planned sale of the plant itself.

Sweet business Krajowa Spółka Cukrowa, key figures*

2008/09 2009/10 2010/11 2011/12

Sales, PLNbn 1.65 1.52 1.78 2.33

Net result, PLNm 275 188 283 561

Source: KSC *) KSC's financial year begins in October

"We are glad we were able to find a solution that is fa-vorable for the Włocławek employees. In the past years we had sold two factories, in Białystok and Kotlin, to new investors, who in both cases developed the business. I am certain KSC will be a good and solid employer as well as our supplier, giving us access to quality produce from the Kujawsko-Pomorskie re-gion," Agros Nova's CEO Marek Sypek commented. Sugar giant seeks to diversify As for KSC, which boasts a 39% share in Poland's sug-ar production, the company has long been looking for ways to diversify its operations. With seven mills pro-cessing 4m tons of beet per annum, KSC is Europe's 7th largest sugar producer. In the financial year 2011/2012 it cashed in PLN 2.33bn in sales revenues, up from PLN 1.78bn in the preceding year, while its net earnings totaled PLN 561m, against PLN 283 a year earlier. Besides expansion abroad (KSC acquired a

sugar mill in Moldova), the company seeks to grow its presence in the grain processing and food sector. "We are preparing for the planned lifting of sugar quo-tas in 2017, aiming to minimize the negative impact of market liberalization on our business. Diversification is key to this strategy, and since the beginning of the year we have made some crucial strides with the ac-quisition of grain processing company Młyny Stoisław as well as the Agros-Nova factory in Włocławek. We see substantial prospects for further acquisitions, be-cause Poland's food industry has not yet reached its full potential. Although we are interested mainly in the segments where KSC already operates – sugar, confec-tionery, fruit & vegetable processing, and cereals, we are looking for development opportunities in all areas of the food & agri business," says Bogusław Mazur.

KSC is key player on the Polish market Sugar production in 2010/2011, market shares by producer

Nordzucker

9%

Suedzucker

25%

KSC

39%

Pfeifer &

Langen

26%

Source: Suedzucker

At the beginning of October 2013 the Treasury Minis-try said it was ready for talks with stakeholders about the potential third attempt to privatize the sugar giant. KSC were to go private last year, but the process was suspended and the government has not been able to come up with a satisfactory formula for exiting the

business since. According to the original plan, KSC shares were to be acquired by its suppliers – a group of approximately 17-18,000 sugar beet growers. Howev-er, the latter reportedly signed up for merely 60% of the stock on offer, lacking the necessary financial muscle. As subscription got underway, it became clear that the most active farmers-investors were operating on behalf of a money-laden third party. That shadow backer was Poland's top food industry group Maspex, which provided "loans" to a group of farmers and KSC employees, who were eligible for buying shares in the business. This irked the other potential share buyers, who feared they would lose in competition with finan-cially stronger competitors and receive smaller stakes in the sugar producer. In the end the Ministry can-celled the sale, sacked KSC's boss for his unclear role in the entire story, and asked investigators to look into the way the privatization had been carried out.

IT & TELECOM

French mobile app French mobile app French mobile app French mobile app developer Playsoft developer Playsoft developer Playsoft developer Playsoft moving to new offices moving to new offices moving to new offices moving to new offices in Gdańskin Gdańskin Gdańskin Gdańsk

French mobile applications developer Playsoft has pre-leased 800 sq.m of class-A office space in Olivia Four, the fourth building of Olivia Business Centre (OBC), developed by Gdańsk-based company TPS. Playsoft is hoping to move into the new premises in May 2014, becoming the building's first tenant. "The main reason for the relocation is to offer the best possible working conditions to our employees. We have a strong team now, great clients and the optimum size to handle the biggest projects we could hope for at


the same time maintaining flexibility. We of course do not reject the possibility of further expansion, and in that matter, OBC is a great choice due to the huge de-velopment potential of complex they are creating," Pierre Olivier Monteil, Managing Director of Playsoft Polska, tells Poland Today.

Olivia Four will be delivered in March 2014 with a leasable area of 14,500 sq.m. The entire Olivia Busi-ness Center office park, which will comprise seven buildings with a total area of 120,000 sq.m, is being constructed at Grunwaldzka Avenue, Gdańsk main ar-tery, close to the Gdańsk University campus.

Olivia Business Center will include seven buildings with a combined GLA of 120,000 sq.m. Image: TPS

"Our investment is a particularly interesting option for BPO clients. The central location and easy access to public transport, university campus and other office parks, will support their stable, long term develop-ment. Playsoft our second French tenant after IT out-sourcing company SII which started with several doz-en people and now employs 400 professionals," said

Maciej Kotarski of TPS, the company responsible for the development and leasing of Olivia Business Centre.

DATA BOX: TRI-CITY OFFICE MARKET IN 1H 2013

• With a total supply of 430,250 sq.m, Tri-City is the

fourth largest office market in Poland, behind Warsaw,

Krakow and Wrocław. In H1, new completions added

52,700 sq.m to the region's office stock, including two

buildings within the Olivia Business Centre: Olivia

Tower (14,240 sq.m and Olivia Point (9,600 sq.m.),

BPH Office Park A&B (9,150 sq m), the G-330 building

(6,350 sq.m.), Oliva Business Park – Alfa (5,000 sq.m),

and Port Gdynia office building (4,800 sq.m).

• At the moment, there is 71,200 sq.m of office space

under construction in Tri-City, the majority of which –

54,200 sq.m – is being developed in Gdańsk. Almost

23,100 sq.m will be delivered to the market by the end

of 2013.

• Supply: In H1 2013, companies leased a total volume

of 22,400 sq m of modern office space. New

contracts, pre-let agreements and relocations (net

demand) accounted for 71% of the leased space.

• Vacancy rate: At the end of Q2, more than 56,000 sq

m (13,1%) of Tri-City office space remained vacant. The

vacancy rate is stable.

• Rents: At the end of Q2 headline rents remained

stable at the level of €12-14. However, effective rents

are lower because of incentives offered by the

landlords.

"The employee friendly location and economic effi-ciency of the property were of key importance to our client. The process of selecting a new office and nego-tiating the lease terms took a long time as eight prop-erties had been taken into consideration. Finally, the

building under construction was chosen as this option was optimal and more flexible in terms of confirming the fit-out plan and the costs," said Mariusz Wiśniewski, Head of CBRE’s Tri-City Office, who supported Playsoft in their search for new offices. Helping global giants go mobile With a staff of 100 (of whom 80 are based in Gdańsk and the rest in France), Playsoft develops applications and games for mobile platforms, such as smartphones and tablets. The company has been operating in Po-land since 2006 and its Gdańsk unit focuses mainly on creating mobile applications for brands and media (it has delivered the main app for the French daily Le Figaro as well as applications for payment card com-pany Visa, among others) as well as developing and porting mobile games for the world's top names in dig-ital entertainment (Electronic Arts, Square Enix, Disney, Namco, Sega, Ubisoft, and Zynga, to name just a few). Their portfolio includes mobile versions of titles such as Avengers, SimCity, Need for Speed, and Monopoly. Playsoft has also published the official mo-bile game celebrating the 100th edition of the Tour de France, and it is working on other original produc-tions. "The scope and complexity of our projects are expand-ing very rapidly and this is the main reason we do not target specific growth but rather keep increasing our competencies and quality to continue being regarded as a premium partner," says Mr. Monteil. Asked about the IT market in Gdańsk, he replies: "The local market is very dynamic with many IT com-panies hiring great talents, and the relations between companies are generally good, at least based on my ex-perience. There are some looming problems, however, on the recruitment front, as there simply aren't enough programmers to satisfy the demand from companies. This leads to strong competition between recruiters and offers that are not always rational."


POLITICS & ECONOMY

Inflation tops 1% in Inflation tops 1% in Inflation tops 1% in Inflation tops 1% in September, September, September, September, still still still still below below below below central bank's targetcentral bank's targetcentral bank's targetcentral bank's target

Poland's CPI inflation amounted to 1.0% y/y in Sep-tember, according to the country's statistics office GUS. The figure was slightly lower than in August (1.1%) and average projections (1.2%). In m/m terms the consumer price index came in at 0.1%, against ex-pectations for 0.2%. "We now predict that at the end of this year CPI infla-tion will not reach 1.5%, i.e. the lower end target range (2.5% +/- 1%-point). Inflation target of 2.5% could only be reached towards the end of Q2 2014 while earlier we have seen it at the turn of Q1 and Q2 next year," Nordea Bank Polska's chief economist Piotr Bujak said in a market commentary. "There is still no evidence that the underlying inflationary pressures are being revived by the ongoing economic recovery. What is more, domestic demand still does not seem to gain strength quickly enough to start closing the negative output gap before 2015," he added, concluding that the Polish MPC is unlikely to start policy tightening before mid-2014, especially given the expected replacement of hawkish MPC member Zyta Gilowska (see Poland Today Business Review+ No. 007, page 3) by someone with more dovish profile. According to the Nordea analyst, in the past year the dynamics of Poland’s CPI inflation have been heavily dependent on administrative decisions, with reduc-tions of natural gas prices and electricity tariffs, tele-communications fees, as well as a rise in garbage col-lection prices all having made a significant impact on the indicator. The September figures, for instance,

were affected by cuts in public kindergarten fees (by as much as 17.7% m/m according to GUS).

CPI inflation in Poland (y/y)

0%

1%

2%

3%

4%

5%

Mar 11 Sep 11 Mar 12 Sep 12 Mar 13 Sep 13

Source: GUS, the central statistical office

"This was the main driver of surprising drop in annual CPI inflation to 1.0% in September from 1.1% in July-August. Changes of other consumer prices were broadly in line with expectations," said Piotr Bujak, who expects Polish policymakers to continue exerting pressure on consumer prices, pointing to recent efforts by the Energy Regulatory Office to keep costs of elec-tricity for households flat in 2014 and enforce a reduc-tion in natural gas prices for industry. In Mr. Bujak's opinion these actions might at least partially offset the planned hikes in indirect taxes, such as a higher excise tax on alcohol and tobacco.

POLITICS & ECONOMY

Corporate wages Corporate wages Corporate wages Corporate wages growing faster than growing faster than growing faster than growing faster than expected expected expected expected

The average monthly salary in Poland's corporate sec-tor in Poland increased by 3.6% y/y and amounted to PLN 3,770.91 in September, statistics office GUS an-

nounced. In monthly terms Polish salaries grew by 0.3%. The official result has proven considerably high-er than consensus forecasts that put the y/y and m/m figures at +3.1% and - 0.1%, respectively. According to BZ WBK analysts, the faster-than-expected wage growth may bring about improvement in consumption and "also allows to expect some re-bound in investment growth." Overall, they said, "the pace of growth of wages remains moderate (average for June-September period at ca. 2.6 percent y/y), but is higher than inflation. This means disposable income per household has been rising and this supports our forecast of strengthening of private consumption in H2." GUS also said that the combined workforce of Polish enterprises came to 5,495,100 people in September, which means that employment fell by 0.3% y/y and remained unchanged m/m. Analysts had expected the figure to drop by 0.3% y/y and inch up by 0.1% m/m. In related news, according to a recent report by con-sulting giant PwC, by 2030, the average salary in Po-land will have increased by 172% compared to its 2011 level, bringing Poland much closer to the most devel-oped economies. In 2011 Polish salaries were at an av-erage level of USD 1,153 gross, in 2030 they are ex-pected to be USD 3,137. At present, Polish wages amount to only 33% of the average earnings in Germa-ny and in the US. Out of 21 countries featured in the PwC report, only India, China, the Philippines and Malaysia will record higher growth. PwC experts stressed that high salary growth will translate into labor-cost growth, which will negatively influence the competitiveness of the Polish economy. They added that while salaries are expected to grow by 6% annually, labor efficiency will grow by only 4% each year.


KEY STATISTICS

Consumer PriceConsumer PriceConsumer PriceConsumer Pricessss

Data in (%) Jun '13 Jul '13 Aug '13 Sep '13

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

Food & bev +0.7 -0.3 2.5 -0.3 2.5 -1.2 2.6 0.0

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

Clothing, shoes -4.7 -0.8 -5.0 -2.7 -4.8 -2.7 -4.7 +0.7

Housing +0.9 0.0 +2.0 +1.2 +2.0 +0.1 +1.8 +0.1

Transport -3.5 +0.4 -1.2 +1.1 -1.4 +0.5 -1.4 +0.8

Communications -9.7 0.0 -9.7 0.0 -9.7 0.0 -9.7 0.0

Gross CPI +0.2 0.0 +1.1 +0.3 +1.1 -0.3 +1.0 +0.1

IIIInflationnflationnflationnflation

-1%

0%

1%

2%

3%

4%

5%

Sep 11

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

y/y m/m

Retail Retail Retail Retail TurnoverTurnoverTurnoverTurnover

Month Apr '13 May '13 Jun '13 Jul '13 Aug '13

m/m (%) -2.7 +1.6 +1.5 +3.8 -0.7

y/y (%) -0.2 +0.5 +1.8 +4.3 +3.4

Year 2008 2009 2010 2011 2012

Turnover in PLNbn 564.7 582.8 593.0 646.1 n/a

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

Residential ConstructionResidential ConstructionResidential ConstructionResidential Construction

Dwellings

(in '000 units)

2008 2009 2010 2011 2012 Jan-Sep

2013

y/y

(%)

Permits 230.1 178.8 174.9 184.1 165.1 104.8 -18.1

Commenced 174.7 142.9 158.1 162.2 141.8 97.9 -16.2

U. construction 687.4 670.3 692.7 723.0 713.1 707.0 -3.9

Completed 165.2 160.0 135.7 131.7 152.5 103.2 -1.5

Source: Central Statistical Office (GUS)

GGGGross Domestic Productross Domestic Productross Domestic Productross Domestic Product

Period Growth y/y unadjusted

GDP in PLN bn current prices

Current account def. in % of GDP

Q2 2013 +0.8% 395,507 -1.9%

Q1 2013 +0.5% 377,815 -2.8%

Q4 2012 +0.7% 442,231 -3.5%

Q3 2012 +1.3% 393,792 -4.1%

2012 +1.9% 1,522,736 -3.5%

2011 +4.5% 1,462,734 -4.9%

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

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

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

Indicator *2010 *2011 *2012 2013 2014

GDP change +3.9% +4.5% +1.9% +1.2% +2.7%

Consumer inflation +2.6% +4.3% +3.7% +1.1% +2.0%

Producer inflation +2.1% +7.6% +3.4% -1.3% 0.3%

CA balance, % of GDP -5.1% -4.9% -3.5% -1.2% -0.2%

Nominal gross wage +3.9% +5.2% +3.7% +3.0% +4.3%

Unemployment** 12.4% 12.5% 13.4% 13.7% 13.2%

EUR/PLN 3.99 4.12 4.19 4.20 4.06

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

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

Sector Q3 2012 Q4 2012 Q1 2013 Q2 2013

A B A B A B A B

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

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

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

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

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

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

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

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

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

Source: Central Statistical Office (GUS)

Construction OutputConstruction OutputConstruction OutputConstruction Output

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

m/m (%) +20.9 +7.9 +16.1 +19.1 +7.8 -0.8 +9.4

y/y (%) -18.5 -23.1 -27.5 -18.3 -5.2 -11.1 -4.8

Year 2006 2007 2008 2009 2010 2011 2012

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

Source: The Central Statistical Office of Poland, GUS

Sentiment IndicatorsSentiment IndicatorsSentiment IndicatorsSentiment Indicators

Economic sentiment and consumer confidence indicators

-40

-20

0

20

Dec 10

Mar

11

Jun 11

Sep 11

Dec 11

Mar 12

Jun

12

Sep

12

Dec 12

Mar 13

Jun 13

Sep

13

60

80

100

120 Co nsumer confidence (left axis)

Economic sentiment (right axis)

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

Producer PriceProducer PriceProducer PriceProducer Pricessss

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

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

y/y (%) -0.7 -2.1% -2.5 -1.3 -0.8 -1.1 -1.4

Year 2006 2007 2008 2009 2010 2011 2012

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

Construction PriceConstruction PriceConstruction PriceConstruction Pricessss

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

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

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

Year 2006 2007 2008 2009 2010 2011 2012

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

Industrial OutIndustrial OutIndustrial OutIndustrial Outputputputput

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

m/m (%) -0.2 -2.3 -0.7 +2.6 +1.5 -4.5 +9.6

y/y (%) -0.6 +2.7 -1.8 +2.8 +6.3 +2.2 +6.2

Year 2006 2007 2008 2009 2010 2011 2012

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


TTTTraderaderaderade

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

EXPORTS in PLN bn IMPORTS in PLN bn

Jan- Jul 2013

y/y (%)

share (%)

2012 share (%)

Jan- Jul 2013

y/y (%)

share (%)

2012 share (%)

Food and live animals 37,974 +9.9 10.5 61,694 10.3 26,750 +3.6 7.4 44,287 6.9

Beverages and tobacco 4,910 +5.9 1.4 7,967 1.3 2,271 -0.1 0.6 3,989 0.6

Crude materials except fuels 9,077 +5.1 2.5 14,024 2.4 12,302 -7.6 3.5 22,053 3.5

Fuels etc 17,106 +0.1 4.7 29,389 4.9 41,400 -14.3 11.4 85,280 13.4

Animal and vegetable oils 920 +62.1 0.3 1,342 0.2 1,492 -8.7 0.4 2,887 0.5

Chemical products 33,929 +6.5 9.4 54,295 9.1 53,686 +0.3 14.8 89,140 14.0

Manufactured goods by material 74,733 -0.5 20.7 126,161 21.1 63,760 -6.0 17.5 110,773 17.4

Machinery, transport equip. 136,236 +3.3 37.7 223,646 37.5 120,298 -0.5 33.1 203,718 31.9

Other manufactured articles 45,323 +3.8 12.6 75,925 12.7 31,609 -8.6 8.7 57,646 9.0

Not classified 901 n/a 0.2 2,653 0.5 10,201 n/a 2.6 18,515 2.8

TOTAL 361,109 +3.4 100 597,096 100 363,769 -4.3 100 638,288 100

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

EXPORTS in PLNbn IMPORTS in PLN bn

No Country Jan- Aug 2013

share *2012 Share No Country Jan- Aug 2013

share *2012 Share

1 Germany 103,223 25.0% 150,046 25.1% 1 Germany 88,967 21.3% 134,933 21.1%

2 UK 26,788 6.5% 40,184 6.7% 2 Russia 52,447 12.6% 91,033 14.3%

3 Czech Rep. 25,260 6.1% 37,475 6.3% 3 China 38,360 9.2% 57,235 9.0%

4 France 23,321 5.68% 34,862 5.8% 4 Italy 21,213 5.1% 32,782 5.1%

5 Russia 22,508 5.4% 32,290 5.4% 5 France 16,034 3.8% 25,303 4.0%

6 Italy 17,805 4.3% 29,067 4.9% 6 Netherlands 15,726 3.8% 24,543 3.8%

7 Netherlands 16,321 4.0% 26,678 4.5% 7 Czech Rep. 15,426 3.7% 23,327 3.7%

8 Ukraine 11,709 2.8% 17,213 2.9% 8 USA 11,909 2.9% 16,436 2.6%

9 Sweden 11,339 2.7% 15,811 2.6% 9 UK 11,030 2.6% 15,509 2.4%

10 Slovakia 10,673 2.6% 15,288 2.6% 10 South Korea n/a n/a 14,619 2.3%

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

CurrencyCurrencyCurrencyCurrency

Central Bank average rates

as of 18 October 2013

100 USD 305.06 ↓

100 EUR 417.69 ↓

100 GBP 493.75 ↑

100 CHF 338.24 ↓

100 DKK 56.00 ↓

100 SEK 47.61 ↑

100 NOK 51.50 ↑

10,000 JPY 311.72 ↓

100 CZK 16.23 ↓

10,000 HUF 141.94 ↓

100 USD/EUR against PLN

300

350

400

450

6 N

ov 12

16 Jan 13

25 M

ar 13

5 Jun 13

12 A

ug 13

18 O

ct 13

USD EUR

MMMMoney Supplyoney Supplyoney Supplyoney Supply

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

Monetary base 150,475 144,260 155,767 153,867

M1 508,299 523,783 530,666 531,124

- Currency outside banks 109,312 112,815 112,565 114,083

M2 920,112 927,345 921,662 928,359

- Time deposits 425,740 418,252 405,900 412,407

M3 941,791 946,586 945,077 949,988

- 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

CCCCreditreditreditredit

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

Source: Central Bank NBP

IIIInterest ratesnterest ratesnterest ratesnterest rates

Average weighted annual interest rates

on loans to non-financial corporations

Term / currency Mar '13 Apr '13 May '13 Jun '13 Jul '13 Aug '13

PLN (up to 1 year) 5.6% 5.4% 5.3% 5.0% 4.7% 4.6%

PLN (up to 5 y ) 6.2% 5.9% 5.7% 5.4% 5.1% 5.1%

PLN (over 5 y) 6.0% 5.7% 5.6% 5.3% 4.9% 4.9%

PLN (total) 6.0% 5.8% 5.6% 5.3% 5.0% 4.9%

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

EUR (over 1m EUR) 3.6% 2.9% 3.2% 2.9% 3.5% 3.5%

Warsaw Inter Bank Offered Rate (WIBOR) as of 18 Oct 2013

Overnight 1 week 1 month 3 months 6 months

2.58%% 2.55% 2.59% 2.67% 2.70%

Central Bank (NBP) Base Rates

Reference Lombard NBP deposit Rediscount

2.50% 4.00% 1.00% 2.75%

Stock ExchangeStock ExchangeStock ExchangeStock Exchange

Warsaw Stock Exchange, rates in PLN

WIG-20 stocks in alphabetical

order

Price 18 Oct '13

Change 11 Oct '13

Change end of '12

↑ Asseco Pol. 49 0% +8%

↓ Bogdanka 111 -1% -18%

→ BRE 511.5 0% +57%

↓ BZ WBK 358 -4% +48%

↑ Eurocash 48.8 +2% +12%

↑ GTC 8.23 +4% -17%

↑ Handlowy 124.15 +5% +26%

↓ JSW 68.55 -8% -26%

↓ Kernel 50.7 -5% -24%

↓ KGHM 121.35 -1% -36%

→ Lotos 37.25 0% -10%

↑ Pekao 196 +2% +17%

↑ PGE 17.66 +1% -3%

↓ PGNiG 5.74 -4% +10%

↓ PKN Orlen 44.7 -2% -10%

→ PKO BP 38.9 0% +5%

↑ PZU 443 +2% +1%

↑ Synthos 5.32 +5% -2%

↑ Tauron 4.97 +1% +5%

↓TP SA 8.64 -1% -29%

Source: Warsaw Stock Exchange

Key indices

as of 18 October 2013

WIG Total index

55552222,,,,587587587587....24242424 Change 1 week +1% ↑

Change end of '12 +11% ↑

WIG-20 blue chip index

2,2,2,2,484848485555....13131313 Change 1 week 0% →

Change end of '12 -4% ↓

WIG Total closing index

last three months

45000

46000

47000

48000

49000

50000

51000

52000

53000

19 Jul 13

12 A

ug 13

4 Sep 13

26 Sep 13

18 O

ct 13


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RRRRegional Dataegional Dataegional Dataegional Data

Poland's regions

(main cities indicated

in brackets)

Industrial output

Jan-Aug 2013 *

Monthly wages (PLN)

Jan-Aug 2013 **

Unemploy-ment

Aug 2013

New dwellings Jan-Aug 2013

Indus-

try

Constru-

ction

Indus-

try

Constru-

ction

in '000 % Num-

ber

Index *

Dolnośląskie (Wrocław) 98.2 87.5 4,169 3,907 149.7 12.9 10,403 115.2

Kujawsko-Pomorskie (Bydgoszcz) 101.3 94.7 3,314 3,239 142.7 17.3 4,138 111.6

Lubelskie (Lublin) 99.5 96.0 3,628 2,999 127.4 13.7 4,021 89.1

Lubuskie (Zielona Góra) 94.3 85.4 3,351 2,974 58.3 15.2 2,020 99.0

Łódzkie (Łódź) 103.7 87.5 3,604 3,000 148.8 13.7 4,150 94.9

Małopolskie (Kraków) 97.6 90.8 3,740 3,295 158.5 11.3 10,314 110.3

Mazowieckie (Warszawa) 107.0 81.1 4,482 4,761 282.0 11.1 17,638 91.6

Opolskie (Opole) 96.0 97.3 3,469 3,128 49.2 13.5 1,093 109.6

Podkarpackie (Rzeszów) 107.6 93.6 3,234 3,024 146.2 15.5 3,991 100.4

Podlaskie (Białystok) 105.4 88.7 3,175 3,754 68.3 14.5 2,230 80.8

Pomorskie (Gdańsk-Gdynia) 101.6 92.2 3,866 3,471 109.7 12.8 7,331 91.4

Śląskie (Katowice) 96.0 87.6 4,445 3,477 205.3 11.1 6,907 116.4

Świętokrzyskie (Kielce) 98.9 87.2 3,339 3,163 85.5 15.6 1,597 87.9

Warmińsko-Mazurskie (Olsztyn) 98.1 85.1 3,163 3,055 107.1 20.2 2,697 88.3

Wielkopolskie (Poznań) 102.7 88.4 3,638 3,584 142.5 9.5 8,905 98.2

Zachodniopomorskie (Szczecin) 110.1 84.7 3,398 3,230 102.1 16.6 3,667 76.5

National average 100.8 86.7 3,873 3,658 2,083.2 13.0 91,102 98.3

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 Q1'12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13

in Poland -1,365 1,861 1,381 2,886 175 -2,883

Polish DI 836 310 -550 -1,203 957 2,719

Year 2007 2008 2009 2010 2011 2012

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

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

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

Period 2010 2011 2012 Q4 '12 Q1 '13 Q2 '13

Trade balance -8,893 -10,059 -5,313 -1,050 -139 1,194

Services, net 2,334 4,048 4,816 1,032 1,274 1,652

CA balance -18,129 -17,977 -13,332 -3,368 -2,313 362

CA balance vs GDP -5.1% -4.9% -3.5% -3.5% -2.8% -2.8%

Source: NBP, BZ WBK

UUUUnemploymentnemploymentnemploymentnemployment

Registered unemployed, in ‘000 and

% of population in working age

1800

2000

2200

2400

2600

Q2 10

Q4 10

Q2 11

Q4 11

Q2 12

Q4 12

Q2 13

6

9

12

15 number (left axis) % (right axis)

Source: Central Statistical Office GUS

IndustrIndustrIndustrIndustrial ial ial ial PropertiesPropertiesPropertiesProperties

by region, 1H 2013

Existing stock, sq.m

Under const ruction, sq.m

Va-cancy ratio

Effective rents EUR/ sq.m/mth

Warsaw central 2,728,000 41,000 15.9%

3.5–5.0

Warsaw suburbs 1.9–3.2

Central Poland 1,021,000 8,000 16.5% 1.9–3.1

Poznań 1,041,000 50,000 3.6% 2.3–2.9

Upper Silesia 1,478,000 33,000 5.8% 2.5–3.1

Wrocław 795,000 84,000 5.5% 2.4–3.0

Gdańsk 192,000 n/a 9.6% 3.2–4.0

Kraków 149,000 n/a 7.6% 4.0-4.1

CommercialCommercialCommercialCommercial PropertiesPropertiesPropertiesProperties

City

New apartments* Offices 1H'13 Retail rents**1H'13

Q1 '13

PLN/sq.m

Change

y/y

Rents** Vacancy Retail

centres

High

streets

Warsaw 8,076 -5.9% 11.5-25.5 10.5% 85 85

Kraków 6,305 -12.1% 13-15 2.71% 41 78

Katowice 5,526 -5.0% 13-14 8.29% 48 56

Poznań 6,412 -13.3% 14-16 14.66% 44 55

Łódź 4,898 -9.2% 12-14 14.97% 31 26

Wrocław 6,031 -13.5% 13-16 12.37% 38 41

Tricity 6,453 -8.1% 13-15 11.24% 39 31

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

Country Credit RatingsCountry Credit RatingsCountry Credit RatingsCountry Credit Ratings

Agency rating outlook

Fitch Ratings A- stable

Standard & Poor's A- stable

Moody's A2 stable

Source: Rating agencies

Real EarningsReal EarningsReal EarningsReal Earnings

Average gross wage vs inflation.

100

120

140

160

180

Sep09

May10

Jan11

Sep11

May12

Jan13

Sep13

Wage CPI

Index 100 = Jan 2005. Source: GUS

Poland Today Business Review+ No. 008

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