BusinessMagazin

Category: Bm english

  • Architecture for Crisis

    Every city that wants to be seen as a tourist attraction boasts at least one emblematic modern building, designed by a famous architect. In addition to prestige, this also brings travel revenues. ”In order for Bucharest, in turn, to boast an architectural symbol, it is essential for a trend to be created. In Spain, the mega projects were launched in Barcelona, and then the other cities started to ask for buildings designed by famous architects,” explains Bofill.

    The architect says the crisis is the best time to make such plans, with the launches to take place after the crisis is over. In Bucharest, he has designed an entire quarter for Spanish company Avantia, on a 12 hectare plot bordering Lacul Morii (Morii Lake). It will include office buildings, extensive commercial areas and residential buildings, covering 590,000 square metres in overall built area.

  • Ultra-bankruptcy

    The story of K Tech Electronics, the company behind the Ultra Pro Computers stores, is coming dangerously close to an unfortunate end. Once one of the most important IT retail brands in Romania, along with Flamingo, Depozitul de Calculatoare and Best Distribution, Ultra Pro Computers rose in a time when computer retail was in its infancy and was the only one to have kept its initial business philosophy – small stores specialized in IT products, almost intact since the beginning. Now, the company is going through its most difficult moments in fourteen years, precisely because of this philosophy.

    The main problem of K Tech now are the unpaid debts to banks and suppliers, which, according to a source close to the company, have exceeded 15 million euros. K Tech therefore defaulted both because of the lack of cash, as well as of the abruptly declining sales of late – with the same sources saying that the company’s business was slightly up last year to almost 80 million euros, around 1-2% of which was a net loss, but, in the first few months of 2009, the decline stood at more than 50% compared with the same time of the previous year.

    One also has to consider the monthly expenses of the company, approximately one million euros, of which only 10% are personnel expenses, and the rest being used for rents and inventories, which contributed to the gradual postponement of payments and to the piling up of debt. Over two thirds of the 15 million euros are bank loans taken out by K Tech Electronics to develop the business, for which it pledged as collateral inventories and properties that have lost a lot of their value in the meantime as a result of the economic decline.

    Payment delays of more than thirty days made UniCredit Tiriac, to which the Fughinas’ company owes 7 million euros, along with six other banks – Citibank, Alpha Bank, Banca Transilvania, BCR, Banca Romaneasca and BRD, to resort to the compulsory execution of K Tech Electronics. The banks won the right to seize the warehouses of the IT retail company – one of which located in the Key Logistic Center park and the other at the company’s headquarters in the APACA complex, so as to use the stocks valued at approximately 5 million euros to recoup some of their receivables.

    Most of the stocks in the central warehouse were sold to Flamingo at the beginning of last month (an information which the officials of the company would not comment on) at a lower price than the actual value of the products, a source close to the company says, but the process was stopped when K Tech Electronics challenged the compulsory execution, thus putting the plans of the seven banks on hold. Debt to banks is not the only problem of the IT retail chain. Another over 5 million euros that Fughinas’ company did not pay in time should go to suppliers of products and utilities.

    Part of them are already going to court to request that K Tech be summoned to pay or be declared bankrupt, the most recent such example being Tornado Sistems, one of the biggest distributors of IT&C products in Romania. ”The over six-month old debt we have to recover is not that high, it’s in the range of tens of thousands of euros, but so far we have not been able to reach a friendly resolution,” says John Cusa, chief executive of the distributor, explaining the filing with the Constanta Court of Law at the beginning of last week.

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican

  • Who’s Afraid of the Dentist?

    When he decided, back in 2004, to open his first dental clinic dedicated to corporate clients in Bucharest, everybody told Michaell Shkurko this was insane. Born in Russia 50 years ago, raised in Israel and trained as a stomatologist in Romania and Italy, Shkurko set up his first clinic on the Romanian market in a villa rented out on Bucharest’s Ferdinand Boulevard.

    Dental Plan, which in the meantime has moved headquarters to Tipografilor Str. (N Bucharest), now has around 5,000 subscribers via the contracts Michaell Shkurko has signed with Petromservice, Volksbank and Bancpost (this compares with the over 70,000 subscribers each for Unirea Medical Centre and Medicover – clinics specialising in general medicine). Last year, Dental Plan posted half a million euros in turnover, slightly above the 400,000 euros originally invested in the business by Michaell Shkurko.

    For 2009, Michaell Shkurko expects a turnover more or less similar to last year’s from the Dental Plan clinic, but his businesses will reach one million euros this year after completion of a second clinic – which will be smaller than the current one, and will also have a lab and a training center. Five years from its opening, Dental Plan remains the only clinic opened in Romania on the corporate clients segment. For individual clients, however, the market is very fragmented, consisting of around 11,600 practices throughout the country.

    Oana Taban, in turn a trained stomatologist, set up her own clinic ten years ago, by extending her individual practice. ”Initially I had one single dental chair, then realised I had too many patients and started to hire staff,” says Oana Taban, owner of the four Dent Estet clinics in Bucharest, who says she now derives 1.5 million euros in turnover. Apart from the four clinics, Oana Taban also invested in a business that has mainly attracted expats – eco clinic Green Dental, operated together with Cristi Costachescu and Cristi Misailescu, founders of Velvet Dental, Dent Estet’s main rival. Green Dental is affiliated to Green Dentistry, a project initiated and funded in 2004 by the European Union, with its main concern being eco-friendly management of dental waste.

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican

  • New Wine for Connoisseurs

    In an interview given to BUSINESS Magazin, the otherwise discreet businessman, who does not want to have his photo taken, told the story of the business he founded 17 years ago together with his partner Bogdan Costachescu (an oenologist and owner of 10% of Davino).

    Catalin Paduraru, a wine critic and one of the shareholders of Vinexpert retailer, says ”Davino has seen the most spectacular evolution among all wines launched on the market over the last few years (since 2000 i.e.). ”In 1992 I started a wine import and distribution business, but I had always wanted to be involved in production,” says Balaban, who put the first bottle of Davino wine on the market in 2000. Since then, the brand has become known, especially among connoisseurs. Starting in 2006, Balaban has taken Davino out of the regular retail circuit, and has sold it only on the on-premise segment (hotels, restaurants and catering).

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican

  • The African Queen

    Under the circumstances, Africa is now the queen of spring and summer collections of major designers. One of the most successful products of African inspiration on the market has been the spring/summer collection created by Marc Jacobs for Louis Vuitton.

    To add flavour to the shoe line (called Spicy), the designer has included elements usually associated with Africa – snakeskin, feathers and semi-precious stones. The collection is dedicated to Josephine Baker, the famous singer and dancer from the 1920’s Paris, whose exotic features conquered the City of Lights. The shoes now lead the African fashion caravan and, despite the crisis, are selling like hot cakes.

    Chloë Sevigny is a Hollywood star who appeared on the red carpet wearing a pair of Vuitton Spicy, and has sparked a craze for this model among celebrities. Demand is high, all the more since every pair is different, suggesting the idea of unique, handmade objects, something that Africa excels in.

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican

  • Who will remain on top?

    Hopes of volumes and profit of the top companies in Romania have significantly dimmed not only compared with last year but also compared with the estimates of the first few months of 2009. The hardest hit are the companies in the industrial sector. First quarter results confirm declines for all the top ten companies by turnover, which could lose more than 4 billion euros this year, as well as their position among the biggest businesses in Romania.

    In Galati, 12,000 employees are expecting options to keep their jobs this year from Augustine Kochurampil, chief executive of Arcelor Mittal Galati. The manager decided after Easter to move to crisis Plan B, and took a few steps to keep things afloat. ”We do not expect things to go back to where they were last year any sooner than two or three years, but we hope for an improvement in demand in the second half of this year and for the time being, even though we did not need 11,700 people to work at 40% capacity, we are looking for options to cope,” Augustine Kochurampil says. The manager’s plan, to work exclusively to order (instead of building stocks), to close the coke and chemical plant, to request employees to take ten days of leave and five days of technical unemployment in rotation, complemented the European strategy of Arcelor Mittal, which decided to close 14 furnaces of the 25 it had in Europe, as well as to completely shut down the plants in Florange (France) and Liege (Belgium).

    ”I’ve been in the steel business for thirty years and I have never seen such a decline in price and demand for steel,” says Kochurampil, who, in his thirty-year career has restructured a bankrupt plant in Germany, another plant that worked based on non-performing barters in Kazakhstan, as well as a plant in Poland where he saw the most difficult strikes, thus going through several crises on the steel market. The current crisis, which reached all economy sectors, has been a hard test for metallurgy in general and for Mittal Galati in particular, with the plant now operating at 40% capacity, without too much of a chance to rebound for the rest of the year.

    The decline of the plant in Galati will probably be the most serious experienced by any major company in Romania this year. The most affected top ten companies this year (which include mostly players from petroleum and telecom industries, as well as from retail, metallurgy, distribution and industry), believes Codrut Pascu, manager of the local office of strategic consultancy Roland Berger, will be ArcelorMittal, Dacia Group, Petrom and Rompetrol, and the least affected will be the retail companies. By ”affected’ the consultant means the decline of the turnover due to the overall decline of the markets, as well as the profitability that will allow them to survive.

    Each company among the biggest in Romania is taking into account significant two-digit declines of its business, with the first quarter results confirming their suppositions: Petrom is talking about 33% lower business in 2009, Rompetrol Rafinare anticipates 50% full-year decline, Rompetrol Downstream could go down by 20%. Mittal has already resigned itself to a potential 60% drop, while Lukoil Romania estimates decreases of 30% (the decline for Petrotel-Lukoil refinery is estimated to be even more serious, around 40-45%). The biggest companies in industry in Romania are now talking about a halving of their business, while the telecom and retail companies are somewhat luckier, as their decline will be less serious this year.

  • Three Moldavian beers

    Martens. Bermas. Albrau. Galati, Suceava, Onesti. The smallest three brewers in Romania are not necessarily the last independents in the field, as other beer businesses not connected to the multinational giants are that of brothers Ioan and Viorel Micula, the biggest local food group, as well as Romaqua’s, the producer of the Borsec water, which has recently entered the beer market with the Albacher brand. What the three small producers, all of them focused around Moldova, have in common is that they lack large production capacity, nationally known brands and promotion, on a market dominated more and more authoritatively by the world’s biggest brewers.

    Heineken, InBev and Ursus Breweries have bought local producers one by one, and the sale of Bere Azuga at the start of this year ended the row of major transactions in this field. ”The rest are not important because they have very low market shares and low production capacities,” says Gheorghe Grec, one of the former shareholders of Bere Mures, who believes only the real estate factor could help stir some interest in the takeover of one of the three producers. Martens Galati, Bermas Suceava and Albrau Onesti are present in their areas with less established brands and production capacities of about 200,000 hectolitres (in comparison, Heineken, the leader of the market, has a technical capacity of 7.7 million hectolitres, 1.6 million hectolitres of which acquired with the takeover of Bere Mures). In a word, they lack exactly what a multinational seeks when it looks at acquisitions on a local market – a significant production capacity and strong brand.

    ”The producers that are still independent do not have any powerful brands and the major ones already have enough production capacity in Romania,” believes Shachar Shaine, chairman of United Romanian Breweries Bereprod, which makes Tuborg, adding that the multinational he represents has not been and is not interested in any acquisition. The three small producers have not given too much thought to this lifeline: Vasile Joanta, the manager of the Galati-based producer Martens, says that although he has not received any takeover offers until now, just ”various questions exploring the possibility”, he is open to such talks in the future.

  • Business on the ski track

    In fact, Austria has been the No. 1 destination for Romanian tourists this winter season. Over 30% more Romanians have been willing to travel over 1,500 kilometres and spend 650 euros per person on average for a 7-night package in Austria.

    The same standard applies in resorts throughout the country. Firstly, the pistes fall into three categories – blue ones are easy, red ones are of medium difficulty, and the black ones are the most difficult. The pistes are usually accessible by means of a gondola or a cable car that takes skiers up, to a main centre. From there, they take ski-lifts or by chairlifts (increasingly rare) and are taken to the higher pistes. Every year, Austrian resorts invest over 50% of the season’s earnings in developing the ski infrastructure. In the last season, investments totalled 557 million euros, with a significant share (203 million euros) being dedicated to developing the artificial snow infrastructure. Additionally, the 2008- 2009 season saw investments worth 122 million euros in building a new piste, ski lifts, car parks and other facilities.

    The après-ski offer (i.e. after-ski entertainment) has also become a tradition in Austria. Cable facilities close at around 4 PM, after which skiers find their way to outdoor or indoor bars. One of the most famous is Elizabeth in Ischgl, the bar on the ground floor of the English-style Elizabeth hotel, where tourists dance in ski boots, while the entertainment is provided by girls dancing in traditional Tyrolean outfits.

    Skiing seasons are opened and closed by major concerts. For instance, Ischgl saw the season end on May 2nd with a Kylie Minogue concert, as part of the Top of the Mountain concert. Additionally, investors and the Austrian authorities are spending significant sums into extending the ski season. Whilst December, January and February are considered to be peak months, one can ski for more than 6 months on glaciers, from November to May. And, given that the quality of snow is greatly prized, 203 million euros were invested in developing the artificial snow infrastructure alone, so over 60% of Austrian pistes are covered with artificial snow.

  • Fight for survival

    From Milan, from where he oversees the business of UniCredit Global Leasing in 17 countries, Septimiu Postelnicu gives a harsh verdict: it will be a few years before we can talk about growth again. ”When you look at 17 countries, you get a different understanding of the overall economic phenomena and of the possible solutions,” Septimiu Postelnicu told BUSINESS Magazin. The 32-year old Romanian oversaw the merger of HVB Leasing and UniCredit Leasing on the Romanian market and has been running the operations of the UniCredit Global Leasing branches in the CEE region from Milan for six months now.

    This gives Postelnicu a clearer and more integrated picture of the chances that the Romanian and European leasing markets have. Neither the present, nor the near future look comfortable, he hints; it is very clear that leasing, as many other industries for that matter, has fallen victim to the economic decline on the entire continent and the coming period will be one of a radical shakeup. ”It’ll be a few years before we can talk about growth,” Septimiu Postelnicu believes. What matters for the time being are the steps that can be taken to survive.
     

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican
     

  • Feel free to cream off the milk

    Shmulik Porre, president and CEO of Tnuva Romania needed only one week to weigh the parent company’s proposal to take over the reins of the Romanian subsidiary. ”It was time to make a change in my career,” says Porre, who was general manager of the largest paint manufacturer in Israel for five years before accepting Tnuva’s job offer.

    It’s been over a year since then, and, when looking at the progression of the company he is running, Porre has no reason to regret making this decision: Tnuva Romania boasted the fastest growth rate on the market in 2008, when it reached 20 million-euro sales. This being the first full fiscal year since the company’s products hit the stores, it was in a way natural for its progression to be more spectacular than that of other milk processors. Porre takes pride in having built a project from scratch on a very competitive and dynamic market, especially since he says he is expecting a 50% turnover growth this year. So far, he has been among the few to make such appraisals; the other dairy processors expect 1-2% rises on average for 2009, at least 4-5 times lower than in past years.

    ”We think the industry will go up this year, as well, but we don’t believe it will be a two-digit rise, like in previous years,” says Traian Simion, general manager of Albalact Alba Iulia, the only large processor listed on the Bucharest Stock Exchange. The dairy market approached 1.3 billion euros in 2008, with dairy products getting top billing in supermarkets and hypermarkets over the last few years. For many years, the market saw a two-digit annual rise, surpassing all growth rates on consumer goods market.

    Now, companies anticipate that market moves have more to do with difficulties generated by the current situation, especially for small processors (which are faced with funding difficulties) than with anything else. Companies need to consolidate their position on an increasingly crowded market, with this year expected to be rich in transactions. For those that have businesses to sell, the timing is quite unfortunate, because the price has gone down significantly against the past few years, while buyers hold all the trump cards in negotiations and can afford to wait until a good deal comes along.
     

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican