Teutonic Titans advance against slow market

Newsroom 23/05/2011 | 11:01

The economic crisis has taken its toll on foreign direct investments to Romania over the past two years, but according to the numbers German investors have defied the general trend, and EUR 6.9 billion has been invested in total locally. Business Review takes a look at the results posted by big German investors in 2010 and some of their plans for the local market.

Simona Bazavan


Germany’s famously solid firms have suffered along with the rest in Romania in the last couple of years. However, looking at how local German companies have negotiated the crisis, it seems that the worst has passed and as the local economy shows signs of recovery, albeit at a measured pace, investment plans are again in the cards. Last week alone Bosch announced that it intends to expand its production unit in Blaj and to build a new greenfield factory after posting a 17 percent turnover increase last year locally.

Germany ranks third among the top foreign investors in Romania, but beyond facts and figures, German companies have become deeply involved in the local economy, filling top positions in retail, energy, manufacturing and insurance to name but a few, and stating their interest in other fields such as green energy and environmental technology.

 

Retail leads the way

Consumption further decreased in 2010 shrinking the sales of local retailers, but it is not all bad news. Rewe Group has announced that its local Penny discount network registered a 4.3 percent turnover increase last year, recording “above-average development”, according to the company’s financial report. The performance reported in Romania is followed by the results in the Czech Republic (+3.8 percent).

The retailer opened seven new Penny Market stores countrywide last year. In Romania Rewe Group operates the Billa, Penny Market and Penny Market XXL networks. Overall, the German retailer announced a turnover increase of four percent to about EUR 53 billion.

German Metro Group, which locally operates Metro Cash & Carry and Real hypermarkets, posted sales of EUR 1.83 billion in Romania last year, down 3.5 against 2009. The drop was generated by a 7.3 percent sales decrease for Metro Cash & Carry (EUR 1.13 billion) while Real saw sales go up by 3.4 percent (EUR 694 million) in 2010. Metro Group’s local network is made up of 26 Metro Cash & Carry stores and 25 Real hypermarkets.

2010 proved to be as hard as nails for local DIY (do-it-yourself) retailers. Praktiker Romania reported net sales of EUR 193.6 million in 2010, 21.8 percent less than the previous year, due to the general economic climate and an overall decline in the DIY market. Praktiker has a 6.4 percent market share in Romania and its main competitors are Dedeman (6.5 percent), Bricostore (4.6 percent) and Baumax (2.9 percent), according to the retailer’s data. In Romania Praktiker has 27 stores.

Other German players on the market are OBI, which has a network of seven units locally. Throughout last year OBI invested EUR 20 million in opening new stores and it plans to keep the same level of investment for this next year too. Hornbach, another German DIY chain active in Romania since 2007, added one more megastore to its local network after finishing an investment of approximately EUR 30 million in Balotesti, near Bucharest, in December. It has announced plans to open another unit in Bucharest.

 

Saving for rainy days

The second largest player on the local insurance market, Allianz-Tiriac, has reported a 7 percent decrease in subscribed gross premiums for Q1 2011, to about EUR 60.6 million.

Another German player, Signal Iduna, announced earlier this year that it had increased its social capital by EUR 2 million earlier this year to a total of EUR 14.99 million. The company’s main shareholders are Signal Iduna Holding AG and Signal Krankenversicherung AG. Leslie Breer, president of Signal Iduna Romania, said the recent capital injection confirms the company’s commitment to the local market and its plans to continue investing here. In 2010 and 2011 the company has increased its social capital by almost EUR 4 million. “The prolonged local crisis hasn’t changed our objectives as a company. Signal Iduna continues to be committed to the goal of bringing quality private health insurance to Romania,” said Breer. He added that this year the company also plans to focus on expanding its accident and life insurance product portfolio.

 

Delivering further growth

The courier express market stagnated in 2009 and 2010 at a value of around EUR 200 million and some of the smaller players went bust. Against the general trends on the market, DHL recorded a double digit total revenue growth in 2010 versus the previous year, mainly driven by international express volumes as a result of intra-European trade lanes development, Gian Sharp, managing director of DHL Romania, told BR. “Our objectives for 2011 mainly aim at operational investments in improving transit times and cut-offs, these being the most relevant elements for our customers when choosing an express courier delivery partner,” said Sharp.

In 2010, DHL launched a new aircraft in Cluj and it will make a EUR 2 million investment in new shelved vehicles in order to improve productivity, added the MD. The company also plans to further invest in training and developing local employees and in the company’s image on the local market by rebranding the fleet for the whole country by the end of Q2. “We are forecasting double digit growth for 2011, in line with our strategy of increasing market share, following our investments in improving international cut-offs. Q1 results are above expectations in both international and domestic volumes,” Sharp concluded.

 

German investors think long term

German Bosch announced last week plans to further invest in expanding its local production unit in Blaj and to build a new greenfield factory. The actual amount to be invested and further details will be made public in the second half of this year, company representatives announced. Bosch Romania posted sales of EUR 161 million last year, 17 percent up on 2009 and the same level as in 2008. This year, the company targets a further 7 percent increase. “Automotive technology posted the best results,” said Brigitte Eble, CEO of Robert Bosch and representative of the Bosch Group in Romania. Bosch runs five centers in Romania including the Bosch Communication Center in Timisoara, the Bosch Rexroth factory, an extension at the Compa factory in Sibiu and a distribution company in Bucharest. At the end of 2010 Bosch Romania had 1,150 employees, 200 more than in 2009.

Elsewhere, last year E.ON Group celebrated five years on the local market. Between 2005 and 2009 the German group invested about RON 1.26 billion in upgrading the local gas and electricity distribution grids with RON 260 being invested in 2009 alone.  E.ON Group representatives announced last year that E.ON companies have been forced to adjust their initially proposed investment budget, which was “significantly below” the amount invested two years ago.

 

Talking concrete plans

The local cement market us estimated to have dropped by 10 to 15 percent last year. Local Carpatcement Holding, part of German HeidelbergCement also saw it turnover go down by 10 percent in 2010 from the EUR 240 million registered by its three local divisions the previous year. Against this backdrop the company has invested approximately EUR 8 million last year in various production-related projects and mainly in modernizing the equipment and a similar budget is planned for 2011, Florian Aldea, general manager of Carpatcement Holding announced at the end of 2010.

 

simona.bazavan@business-review.ro

BR Magazine | Latest Issue

Download PDF: Business Review Magazine March (II) 2024 Issue

The March (II) 2024 issue of Business Review Magazine is now available in digital format, featuring the main cover story titled “BAT DBS Romania Hub: A Vibrant New Office For An Employee-Centric
Newsroom | 27/03/2024 | 17:32
Advertisement Advertisement
Close ×

We use cookies for keeping our website reliable and secure, personalising content and ads, providing social media features and to analyse how our website is used.

Accept & continue