C’est la vie: French investors march on en bloc

Newsroom 07/11/2011 | 12:11

The past year has been no vie en rose for French companies active in Romania, but despite the slowdown, investors from the Hexagon have kept their sangfroid. BR takes a look at the way some of the largest French investors in Romania have handled their business in the past year.

 Simona Bazavan

“Despite the crisis, French companies did not leave Romania in 2010 and have even continued to invest. This year we can mention new investors such as Axa Insurance and the opening of the first Leroy Merlin DIY store,” representatives of the French Romanian Chamber of Commerce (CCIFER) told BR. As for newcomers, CCIFER representatives say that there aren’t any big names in the pipeline as most of the large players are already here, but there is an increased interest coming from small and medium-sized French companies to invest in the Romanian agriculture and agri-food industry as well as renewable energy and informatics.

A recent barometer of the economic and business environment in Romania put together by the chamber indicates that overall French investors are optimistic about the future of their business here, although the socio-political context raises concerns.

“Being optimistic but realistic, I see a rather good future for French investments and physical presence on the Romanian market. I strongly believe that Romania meets so many criteria that plead for greater interest from our investors: cultural, human and geographical proximity, and qualified human resources are just a few of them,” Philippe Garcia, economic counselor and director of the Ubifrance economic mission to Bucharest, told BR.
He stressed that while there are many potentially attractive fields to French investors, such as transport infrastructure, energy, health, financial services and IT, presently the Mission Economique Ubifrance of the French Embassy to Bucharest focuses on two priorities.

The first one is the automotive industry.“There are at this moment about 300 French OEMs (e.n. original equipment manufacturer) established in Romania, with the estimated potential for 50 more: we are working with the Ubifrance network, the French automotive federations and clusters, plus chambers of commerce in France to bring those 50 OEMs to Romania in the next two years,” he revealed. The second short-term priority is to bring new French brands on the retail market in fields like fashion, delicatessen, hairdressing, department stores, automotive maintenance and car-wash stations, as consumption will eventually pick up.

Romania is home to about 6,000 French capitalized companies, according to data from CCIFER. Half of these firms are active and reported a combined turnover of approximately EUR 13 billion and about 110,000 employees for last year. Dacia-Renault, Michelin, Orange, BRD-Groupe Societe Generale, Auchan, Carrefour, GDF Suez, Veolia and Lafarge are at the forefront of French investments in Romania.
France is the third biggest source of foreign capital to Romania with over EUR 7 billion invested by the end of 2009.

Big guns in defensive mode
In the first nine months of this year French carmaker Renault produced about 231,000 Dacias in Romania, down by three percent compared to the previous year. Of these, 207,000 were exported while local sales decreased by 20 percent in the first three quarters of this year.  Global sales of Dacia cars declined by 2.3 percent in the first nine months, with the Duster SUV being the only model that saw sales go up.

Last year the French carmaker invested EUR 166 million – of which about 25 percent was provided by the European Bank for Reconstruction and Development (EBRD) – in the Renault Technologie Roumanie (RTR) technical center in Titu. Following this investment, Renault has everything in Romania from design and test centers, to the production of components, cars and sales centers for all three brands of the Renault-Nissan alliance.

Last September, Renault Romania also opened a new spare car parts center in Oarja, 20 km from Pitesti. According to representatives of the carmaker, the investment in equipment for the center is EUR 3.5 million, with the remaining sum the premises investment made with partners.
Moving from automotive to telecom, where the French also have a strong say in the market, Orange Romania’s revenues in the third quarter of the year totaled EUR 241 million, 3 percent up on the second quarter of the year. However, the company’s revenues decreased from Q3, 2010, when Orange posted revenues of EUR 246 million.

“In Europe, revenues were up 0.5 percent, after rising 0.3 percent in the second quarter. The trend in Romania saw a significant improvement, with the decline limited to 2.0 percent after a drop of 4.9 percent in the second quarter and 6.3 percent in the first quarter,” said France Telecom officials.On September 30, Orange had 10,184,000 clients, which also represents a slight 1 percent growth on the previous quarter of this year. The mobile broadband segment registered 4.3 million clients, having increased 43 percent from the second quarter.

Bankers try to stay steady

In the past year banks have felt the pressure of both the challenging domestic market and international turmoil. French-held BRD posted a 23.3 percent decrease in profits, from RON 367 million in the first half of 2010, to RON 282 million in H1 2011. Net banking income decreased by 9 percent from RON 1,750 million in H1 2010 to 1,600 million in H1 2011.
The number of active clients sank from 2.4 million in H1 2010, to 2.3 million. Loans to customers decreased by 3 percent in value, from RON 16,555 million in H1 2010 to RON 16,052 million. Customer deposits fell by 5 percent, from RON 14,404 million to RON 14,710 million.

French get energetic
Energy, and especially green energy, is often cited as one of the most attractive industries for investors and the French are no exception. Schneider Electric is a French company specialized in the management of energy, with operations in over 100 countries, including Romania.
“We offer solutions for different market segments, occupying leading positions in the areas of energy and infrastructure, industrial processes and data and network centers. The company also has a prominent presence in the domain of applications for the residential segment,” Saulo Spaolanse, president of Schneider Electric Romania, told BR in a recent interview.

The company says it has posted growth in 2011 and is investing in increasing its market share. “I emphasize that we always like to look at the long term. We have been established in Romania for 15 years, so Schneider has a serious commitment to investing in the Romanian economy,” added Spaolanse.

Retailers continue advance
Not only have French retailers continued to expand their operations in the past year, but a new player, Leroy Merlin has entered the Romanian market. The French DIY retailer opened its first local store in the Colosseum retail park this September following an investment of approximately EUR 6 million. The outlet has a 15,000-sqm sales area. French retailer Carrefour opened in October its 24th hypermarket in Romania, also located in the Colosseum retail park in northern Bucharest. Carrefour Colosseum is the company’s eighth hypermarket in the capital and has a sales area of 8,400 sqm. Another hypermarket will be opened this month in Botosani. In addition to the hypermarkets, Carrefour presently operates 40 supermarkets in Romania. Eight units have been opened so far this year and six more will follow by yearend.

However Carrefour did more than expand on its existing formats. This October it also opened its first local proximity store following a franchise agreement with local meat producer and retailer Angst under the name of Carrefour Express Angst. By the end of this year the franchise will be extended to other Angst stores and, by the end of 2012, all of the existing 24 Angst stores and the new ones that will be opened in the meantime will included in the scheme, said Sorin Minea, president of Angst.

Expansion is also in the cards for Auchan. The retailer intends to extend its hypermarket chain over the next couple of years by investing about EUR 150 million.
Another player, Romania Hypermarche, the company that operates the local Cora hypermarket chain, opened this October a new unit in the Galleria Arad shopping center. EUR 5 million went into what is the French retailer’s eighth local hypermarket.

Over the coming years the company has plans to considerably up its expansion pace. Between 20 and 25 new units will be opened in the next three to four years, announced Philippe Lejeune, general director of Cora Romania. In 2012, another three hypermarkets will open in Bucharest, Slobozia and Bacau. At the beginning of the year, the company announced plans to open its own shopping mall in Constanta under the name of Corall, following an investment of EUR 100 million. The shopping mall should open in the second half of 2012.

simona.bazavan@business-review.ro

7 bln euros had been invested by French companies in Romania by the end of 2009, making it the third largest source of foreign capital for Romania

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