Books on Poland
% of GDP
Update No: 092 - (01/01/05)
Belka Wins Parliamentary Vote of Confidence
Poland is still tenuously in the hands of the Left. Prime Minister Marek Belka
of the Democratic Left Alliance, who became premier in May, has finally won the
parliamentary vote of confidence he needed in order for his government to rule.
The outcome of the vote was 236 votes for 215 against with one abstention, which
was pretty close to what pundits had predicted. Just like in the previous
confidence vote, the Democratic Left Alliance (SLD), the Labor Union (UP) and
the majority of independent deputies supported Belka's government.
As expected, right-wing parties such as the Civic Platform (PO), Law and Justice
(PiS), Polish Family League (LPR), Polish Peasants Party (PSL) and Self-Defense
were against Belka.
In the debate prior to the vote, Jaroslaw Kaczynski (PiS) addressed Sejm
deputies and denounced Belka's government as a continuation of post communism,
while PO's Zyta Gilowska said that Belka's success was a continuation of
Miller's success, referring to the previous premier.
The government only won thanks to the votes of the Federated Parliamentary Club
(FKP) and Polish Social Democracy (SDPL), whose deputies agreed to back Belka
after last day negotiations.
Before the vote took place, Belka presented his new plan, which differed from
the previous one only in terms of the concessions he made in order to secure the
SDPL's support. He promised to build a fair state and ensure a citizen-friendly
Firm on reform
After the vote Belka said that he will do anything to ensure that his government
operates until spring next year. Belka stays firm on reforms.
Indeed Belka has pledged to press ahead with fiscal reforms designed to cut
public debt. Belka said that Economy Minister Jerzy Hausner, who had threatened
to quit if reforms were not implemented, had his full backing and would continue
to oversee the reforms.
Belka has called for an acceleration of the country's privatization process.
Belka has stated that the remaining state assets should be sold off through the
country's stock exchange.
Belka is a former finance minister and prior to taking the premiership was the
chief economic advisor to the U.S. administration in Iraq.
The EU is the key
Poland will meet key criteria for stable long-term interest rate and inflation
levels of the Maastricht Treaty in the next 12-20 months, allowing the country
to then begin adoption of the European common currency, Dariusz Filar, a member
of the National Bank of Poland's rate-setting Monetary Policy Council (RPP), was
quoted as saying by Interfax on November 25th.
"I think that these two criteria will be fulfilled within the next 12 to 20
months," he said speaking at an Oracle corporation conference on Polish
Euro adoption in Warsaw. "Poland already has stable rates on its benchmark
10-year bonds and inflation is back on a lowering trend towards 2.5% over the
12-20 months, so we are moving towards meeting both these goals. This will be
very evident by the second half of 2005." The Maastricht Treaty requires
long-term interest rate stabilisation. Bench-mark 10-year bonds yields cannot be
more than 2 percentage points higher than the average 10-year bond rates in the
three EU countries with the lowest inflation. In 2003 this rate was 6.4%.
Poland's 10-year bond yields are hovering around 6.36%. Another Euro entry
criterion is long-term price stabilisation.
The consumer price index (CPI) must grow no more than 1.5 percentage points
faster than the average rate in the three EU countries with the lowest
inflation. This rate was 2.6% in 2003. The Polish government, the central bank
and the International Monetary Fund have all stated publicly recently that
Poland's end-2005 inflation rate, of which CPI is the primary component, will be
at 2.5%, which Filar again confirmed.
In October Poland's consumer prices rose a faster-than-expected 4.5%
year-on-year, after having risen 4.4% in September.
In addition, Euro adoption requires a stable, freely trading currency. Before
full adoption, Poland will enter the Exchange Rate Mechanism 2 (ERM2), which
requires Euro candidates to have a freely traded currency that rises no more
than 15% above a rate set against the Euro and no less than 2.5% below for 2
years, barring any special circumstances.
"The Polish currency is appreciating, and will likely continue to do so for
now," Filar said. "Poland is the only 'free-flow' currency in the
region, so stabilisation will be difficult and negotiating the rate at which we
convert the zloty into the Euro will be a difficult negotiation."
By free-flow, Filar was referring to the fact that the Polish currency's level
is fully determined by market forces. All other new EU accession countries have
currency levels artificially regulated in one way or another. The treaty also
requires that the public finance debt not be more than 3% of the candidate
country's gross domestic product (GDP).
First Polish-made plane leaves for USA
The first Skytruck plane produced as part of the offset deal accompanying the
F-16 supply contract for the Polish air force by PZL Mielec left for the USA on
November 25th. The Mielec-based aircraft plant will produce a total of 100
Skytruck planes for the USA within eight years, PAP News Agency reported.
PZL Mielec CEO, Zbigniew Dzialowski, did not disclose how much one Skytruck
machine costs. Next year PZL Mielec will produce four to nine Skytruck planes
for the United States.
New carrier takes off, but will it fly?
It is aiming for budget travellers who are storming airports throughout the
country, but the competition is heavy reported Warsaw Business Journal recently.
Details of the new service, which has been given the operating title Nowy
Przewoznik (New Carrier), were unveiled just days before Europe's biggest budget
airline easyJet launched its new London-Warsaw route. EasyJet, with an
impressive annual revenue of £52m in 2003, is potentially the new Polish
flyer's strongest competitor.
Nowy Przewoznik will run charter flights previously managed by LOT Charters and
offer regular timetable routes from the first quarter of 2005. An internet
booking system will soon be available to customers.
Over this year Nowy Przewoznik hopes to carry 800,000 passengers using five
Boeing 737s. Achieving this target, however, will require spectacular growth
because the total passenger figure for all budget airlines in 2004 is estimated
at around 1.2m. Undeterred, the company's newly appointed president Piotr
Kociolek asserts: "In a young and developing market like ours, capturing
such a significant share is not a daydream."
Airport traffic in Poland increased by 23% in the first three quarters of last
year compared to the same period a year ago. Some regional hubs reported even
higher numbers: Katowice airport doubled its number of passengers, to almost
half a million until September last year. Poles, who earlier would not consider
flying because of high costs, are now switching from buses to aeroplanes on
their way to other European cities.
Although a new player in the market always causes a stir, the well established
low-cost carriers seem confident of their position.
"Traditional carriers have many times in the past tried to set up a low
cost carrier without much success," says marketing manager for the CEE
region at easyJet Yannis Capodistrias, citing British Airways, KLM and SAS as
While doubting the possibility of Nowy Przewoznik's success, Capodistrias
welcomes new competition.
In Nowy Przewoznik's favour, it brings with it qualities other budget carriers
lack: confidence and trust in its parent company among travellers. "In the
airline business, the customers' sense of security decides the customer's
choice," underlines Kociolek.
BPH more than doubles net profit in Q1-Q3
Poland's third largest bank, BPH, part of the German HVB group, increased its
net profit by 2.5 times year-on-year to 165.4m zlotys in the third quarter of
2004 as it boosted revenues and cut costs, the bank said, Interfax News Agency
Analysts had expected the bank's July-September net profit to range between 151m
zlotys and 173m zlotys. The nine-month net profit totalled 589.4m zlotys, also
more than double the 271.3m zlotys it posted for the first nine months of 2003.
"We have continued a positive trend in the third quarter, and finished
another period with very good financial results," BPH President, Jozef
Wancer, said. "We have managed to increase the revenues from banking
operations and at the same time decreased operating costs for the bank."
The bank hiked its interest income by 9.1 per cent year-on-year to 649.5m
zlotys, with the nine-month result up by 2.8 per cent, on the back of increasing
interest rates and growth in the retail segment. The bank saw a 16 per cent
year-on-year increase of revenues in the consumer segment in the first
three-quarters of 2004 driven by an increase in lending, mainly
Swiss-franc-denominated mortgage loans, but also due to a higher number of
Polish European Committee discusses Lisbon Strategy, EU budget
The European Integration Committee (KIE) met recently to discuss the so called
Lisbon Strategy, EU budget for 2007-13 and the National Development Plan, PAP
News Agency reported.
According to initial estimates some 110bn euros has been assigned from the EU
budget for Poland's modernization projects. This is the sum which should be used
in coming years to accelerate economic development, said Prime Minister, Marek
Belka, who chaired the debate.
The minister for European affairs, Jaroslaw Pietras, said that the National
Development Plan was still being discussed so there was time for possible
changes. The plan's main priority for 2007-13 has been to maintain the high
tempo of economic growth through repairing public finances and seizing
opportunities created by the EU.
The minister said that a meeting of representatives of 13 EU states, friends of
EU cohesion policy, will take place in Warsaw in the near future.
PKN Orlen reports bigger net profit in July-September
Poland's leading fuel group, PKN Orlen, probably doubled or nearly tripled its
bottom line in the third-quarter of 2004, thanks to high refining margins and a
rising Ural/Brent price differential, analysts said. Five analysts polled point
of rising oil prices, a strong zloty and Orlen's cost-cutting programme as the
main factors boosting its results in the July-September period. Their estimates
place the company's net profit at between 491 and 720 million zlotys in the
third quarter of 2004 from 253 million zlotys in the same period of the prior
year, and sales revenues of between 8.1 and 11.1 billion zlotys, up from 6.6
billion zlotys in the same period of the prior year.
"The refining margins, although lower than in the second quarter were still
high. The Ural/Brent differential was rising and the company should get an
additional 80 million zlotys from its ongoing cost-cutting programme. Plus,
rising oil prices influenced the valuation of inventories, while the strong
zloty against the dollar and the Euro impacted on the valuation of the company's
liabilities denominated in these currencies," PKO BP brokerage house
analyst, Sebastian Slomka, said, Interfax News Agency reported.
In the second quarter, refining margins increased by 138 per cent year-on-year
to US$5.84 per barrel, as crude prices increased by 35.7 per cent on average.
The company also gained as the Ural/Brent price differential grew to US$3.12 a
barrel in 2004s second quarter from US$2.05 per barrel in 2003s second quarter.
Polish oil firm may increase investments in Germany
Orlen Deutschland, the PKN Orlen daughter company, does not rule out the
possibility of increasing investments in Germany. An investment plan is to be
approved by the end of January 2005, Orlen Deutschland Deputy Chief Executive
Officer, Michal Jonczynski, said, PAP News Agency reported.
"We've got a new supervisory board that will learn about proposals of the
board and will decide about the final shape of the investment programme,"
Jonczynski told reporters.
He added Orlen Deutschland may control a bigger part of the German market than
has been envisaged. Plans were for the company to invest 35m euro in 2005 and
acquire 30-40 new petrol stations.
Under the plan, by 2007 Orlen Deutschland is to dominate 10 per cent of the
market in northern Germany which will give it control over 2.6 per cent of the
entire German market. At present, Orlen Deutschland controls 7 per cent of the
northern Germany market and 2.3 per cent of the entire German market.
To implement the plan, Orlen Deutschland would have to add 100 new petrol
stations to the 485 it owns at present.
Jonczynski refused to comment on the year-end financial result of Orlen
Deutschland. After three quarters of 2004, the net result was close to zero
which was a result of huge outlays related with the change of the brand name on
stations taken over by the Plock-based concern.
FOOD & DRINK
Smithfield buys Morliny
Global giant Smithfield Foods purchased Morliny meat producers in Poland from
Campofrio Alimentacion of Spain, giving the US-based company a 10 per cent stake
in the Polish market, the newspaper, Rzeczpospolita, reported recently.
An official with Smithfield Foods' Polish branch, Grupa Animex, said that
company purchased 99.36 per cent of Morliny for 181m zlotys (US$53.5m). Company
employees and private cattle farmers hold the remaining 0.64 per cent. Morliny
is the number 2 rated brand in Poland's thriving meat market. Grupa Animex owns
the top seller, Krakus. Morliny employs 1,200 workers and had sales amounting to
375.4m zlotys last year. It reported a 7m zlotys profit for 2003.
Meat processing company ZM Duda is not slowing down its pace of development,
Warsaw Business Journal reported recently.
Despite the fact that it is delaying the publication of its official forecasts
for 2005, the firm should boost profits by over three quarters this year.
"We are completing the collection of data from our subsidiaries and waiting
for the end of the turmoil resulting from the privatisation of PKO BP which
would make our information less visible," said Maciej Duda, managing
director of the company. In 2004 the firm should post a profit of zl.24m, which
would be 89% more than a year earlier. However, the result might be even better,
as ZM Duda should soon consolidate the results of two newly acquired companies -
Makton and Eurosmak. "There is large potential in the rest of the group. We
can save a lot thanks to integration, especially on transport costs," said
Warsaw, Delhi mull options
Poland and India will explore options aimed at intensifying trade in arms and
cooperation in upgrading Indian military equipment, the Polish and Indian
defence ministers were quoted as saying by Deutsche Presse-Agentur (dpa) on
Novemebr 2nd in the Polish capital Warsaw, New Europe reported.
Following official talks with visiting Indian Minister of Defence, Pranab
Mukherjee, Polish Defence Minister, Jerzy Szmajdzinski, announced the creation
of a special joint Polish-Indian working committee focused on the modernisation
of Indian-owned tanks, anti-aircraft and rocket systems and the sale of Polish
radar equipment. Mukherjee said India was also interested in joint training
exercises with NATO-member Poland as well as technology transfer. India has been
a buyer of Polish arms since the early 1980s when Poland was still a communist
country within the soviet sphere of influence.
MINERALS & METALS
Drozapol-Profil to raise over 20m zlotys in IPO
Polish steel products distributor Drozapol-Profil aims to raise 20-32m zlotys in
an initial public offering (IPO) to develop its sales network, finance takeovers
and implement a new IT system, Drozapol-Profil President, Wojciech Rybka, said
recently, Interfax News Agency reported.
The company plans to sell a 26.9 per cent stake made up of new and existing
shares in the IPO, Rybka said.
In the IPO, Drozapol-Profil plans to sell up to 5.55m shares, of which 4.0m will
be new shares. The company plans to offer 3.0m new shares and 1.55m old shares
to large investors, 980,000 new shares to small investors, while the remaining
20,000 will be offered to the firm's employees.
In a separate transaction, it plans to sell 800,000 shares to boost the
"We intend to increase our sales, so we need funds for this development, as
the recently recorded 25 per cent annual sales growth is possible with our
current financial capabilities. We want to implement an IT system and we also
plan to take over companies in the sector that are having problems operating in
the current market situation," Rybka said.
The steel products distributor is in talks with three companies that it could
take over this year.
Drozapol-Profil more than doubled its 2004 nine-month net profit to 12.5m zlotys
from 5.2n zlotys in the analogous period of 2003, as sales revenues rose to 72m
zlotys from 56.4m zlotys in the first nine months of 2003. The company recorded
a 28m zlotys net profit in 2003 on 74.7m zlotys of sales revenues.
PGF maintains 2004 forecasts
Poland's largest drug distributor Polska Grupa Farmaceutyczna (PGF) maintains
its forecast of four billion zlotys of sales and a 64m zloty gross profit for
2004, PGF Financial Director, Jacek Dauenhauer, said recently, Interfax News
"I don't think anything is threatening the realisation of this forecast,
particularly since we have the best quarter ahead of us, the fourth and first
quarters of the year are usually the best season for pharmaceutical
companies," Dauenhauer said. The company plans to record a 489m zloty net
profit in 2004 against 36.6m zlotys in 2003.
Netia beats analyst forecasts with Q3 net profit
Alternative Polish fixed-line telecom operator swung to a higher-than-expected
consolidated net profit in the third quarter of 2004 against a net loss in the
same period of 2003, as the takeover of rival Polish telecom El-Net earlier this
year and a licensing fee write-off linked to that firm bolstered revenues,
Interfax News Agency reported.
Net profit totalled 44.7 million zlotys in the third quarter of 2004, higher
than the 29.2 - 41.0 million zlotys analysts had expected, compared with a 824.6
million zlotys loss in the same period of 2003 which was mainly due to a
one-time accounting procedure tied to licensing fees.
In 2004's second quarter, Netia posted a 38.4 million zloty net profit.
Third-quarter revenue also outperformed analyst forecasts, rising 30.0 per cent
year-on-year to 231.7 million zlotys. It rose 4.2 per cent frorm 222.3 million
zlotys in the second quarter of this year. Analysts had forecast third-quarter
revenue of 221.5-227.0 million zlotys.
The consolidated net profit was higher than expected after Netia included a 25
million Euro one-time licensing fee write-off for El-Net in its third-quarter
profit and loss statement. Analysts had expected the company to book the amount
as a capital increase, they said. Netia announced the 96.5 million zloty
acquisition of its smaller rival from Elektrim Telekomunikacja (ET) in January
2004, justifying the purchase with an eye to its goal of doubling revenues by
2008, and begun consolidating El-Net's results with its own in the second