BusinessMagazin

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  • Top performing managers

    Almost two years ago, towards the end of the first year after EU accession, Liliana Solomon, head of the local branch of the Vodafone group issued a warning to the managers enthusing over consumer spending euphoria and the potential of a 21 million-people market with a rising purchasing power during a meeting organised by BUSINESS Magazin.

    ”Those that make a difference in business are the people who think of ”what if”, not those who say they will grow next year, anyway,” said Solomon, who has a financial background and had worked for major telecom operators in London for years, coming back home in 2005 to take the reins of Vodafone Romania.

    The only participant to that discussion that shared the same opinion was her good friend Mariana Gheorghe, a former EBRD banker, who had taken the reins of the biggest company in the country, Petrom, in 2006. On the other side of the fence were executives in consumer goods, financial services, IT and real estate industries, all of them enthusiastic about the higher than expected results that were about to be achieved in 2007, Romania’s first year of EU membership.

    Less than two years on, the Romanian economy is in full recession, the Gross Domestic Product fell by 7.6% in the first quarter and by 8.8% in the second, heading towards the first annual decline since 2000, a period during which it has tripled (in nominal value). The total number of the unemployed will exceed 800,000 at the end of the year (according to official estimates), compared with only 400,000 last year, whereas arrearage and the acute lack of cash have become ordinary components of the Romanian business landscape.

    Against this background, BUSINESS Magazin intends to bring into the spotlight the managers of the most profitable companies and their business networks, in an attempt to analyse the structure of the Romanian economy, as shown by the ranking of the top performing private companies.

    More than half of the 100 biggest private companies in the country saw their profits increase in 2008, according to data on the Finance Ministry’s website, even though in the second half of the year some star industries of recent years such as real estate, automotive and consumer goods froze, as a result of the deepening global financial crisis and spreading of that turmoil to emerging markets like Romania.

    How much of this trend was because of managers and how much was because of a well-oiled organisation? Radu Furnica, LDS Korn/Ferry Romania and the man who has discovered and recruited some of the most important executives in the country in the course of time, believes it is very hard to establish an immediate causality between profitability of a corporation and its top management.
    ”Simple logic says that those that made the biggest profit also had the best managers. This is not a rule though! On the contrary, most of the top 25 companies by profit are in the upper end of the ranking because they are very large companies, which are hard to beat and which were helped by the market,” Furnica says.

    Consultants, however, say that the personal touch of the person who runs the business is very important in the long run, too, though. Codrut Pascu, head of the local office of management advisory firm Roland Berger says that in order to determine the contribution of the manager, one must look at the extent to which the targets (market share growth, profit, cash flow) were reached, but especially at how the company developed compared to its direct competitors and how prepared the respective companies are to deal with hardships.

  • Gambling market cools down

    However, the streets with a good commercial position have become appealing for several operators of gambling halls, so that each district of large cities has seen at least two-three halls emerge, competing for spaces with banks and drugstores. The crisis fallout and some possible legislative changes will instil some rationale in this market that seemed to know no ending. ”Shall we bring the equipment from Adjud today?

    Is there any room left for them in the warehouse?”, an employee asked the commercial officer of Ritzio gambling hall operator several weeks ago. More than 500 slots have been put out of use from Million electronic casinos since the start of the year in a bid to adjust a business that grew in a very short period of time to the demands of the current market. The Million electronic casinos were brought to Romania in 2005 from the Russians of Ritzio and in 2008 became a market leader in terms of the number of halls and number of slots (over 4,500).

    Like the other major gambling hall operators, Max Bet, Admiral, City Casinos, Ritzio is also forced to renounce part of the halls it opened last year in the wake of investments worth above $75m (54m euros). The economic downturn and a series of legislative changes that will again burden casinos with heavier taxation are likely to once again give a new shape to Romania’s casino market. The market had another boom before, in the ‘90s, but in the first half of 2000 some Fiscal Code changes put most electronic games halls out of business. In 2005 a tough raid by ANAF led to the closedown of the biggest casinos in the country.

    In 2006-2007, there was milder legislation, revenues registered significant growth and Romania this time became attractive for major international groups in the gambling industry.
    While there had been no gambling market, the live casino market had existed, but had stagnated for many years. This latter market also reawakened in 2007 and came to include 23 units countrywide.
    Last year’s big rents were among the main reasons why many gambling hall operators have had to resize their strategy.
     

  • Credit or Policy?

    In Romania, the standard combination includes three or four products on average – a bank account, a loan, a mandatory insurance policy and an account in the mandatory private pensions system. There is no joint calculation method for companies in the fi nancial system that can reveal Romanians’ preferences in terms of fi nancial products.

    However, a standard combination for Romanian clients is not very difficult to put together. ”The most common fi nancial products include banking loans and auto liability insurance, especially since it’s mandatory,” says Cornelia Coman, general manager of ING Asigurari de Viata (ING Life Insurance). On the other hand, there are the over 4.35 million participants to the mandatory private pensions system, making private pensions one of the most prevalent fi nancial products among the employed.

    The same can be said about the current account – decidedly the banks’ best-selling product, ”to which a card and an overdraft, and/or a consumer loan can be attached. But the most common combination is current account – card – overdraft,” says Rozaura Stanescu, delegate executive manager of the strategy and marketing department within BRD-Groupe Société Générale.

  • The Hotel at the Spa

    However, the future of spas looks brighter, and has to do with the hotel operators who realised that a select hotel without a spa simply does not work very well anymore. ”In 2005 I was trapped on the financial market and seeking a place to escape to for a bit of relaxation,” says the owner of Eden Spa, Liliana Paraipan, who had tried the spa centres outside Romania and realised this market needed to be opened in Romania, as well.

    In August 2005, Liliana Paraipan, at the time deputy general manager at the Romanian Commodity Exchange, decided to open her own spa, the first such centre in Romania, – after training in spa management and marketing in the US. In 2005, three months after the launch of the spa business, Paraipan left her position at the Commodity Exchange and started to work on educating the market: ”It was not easy for me to sell the spa therapy concept, because relaxation was directly associated with spending time in beauty parlours and body contouring.

  • See you in ten years

    ENERGY

    Going green –  Renewable energy, of course – no one talks about anything else. This goes for Romania, too, though for a while we will not feel as much pressure to radically replace traditional energy sources with green ones as others do. What kind of energy, then? Currently, 29% of production comes from renewable sources: the high-yield hydroelectric power, which allowed Romania to look like it had complied with EU’s directions.

     

    When it comes to other types of renewable energy, Romania is the country with the lowest investments in the EU, and its luck of having hydroelectric power is up to the flow of rivers, which is dwindling, and with it so is the willingness of international organisations to accept hydropower as renewable energy. Therefore the green future of the Romanian energy is connected to wind, sun and biomass.

     

    For now, gas and coal are the preferred sources, which are highly pollutant and generate 70% of the energy production. However, ”Wind is Romania’s biggest chance for green energy,” believes Ondrejs Safar, who supervises the installation of 240 wind turbines at Fantanele Wind Farm, as part of a CEZ project to build a 600 MW installed power (equal to one nuclear reactor of Cernavod=) wind farm in Dobrogea.

    IT

    Reality of virtual reality  – The dream of smart homes and offices is still on the mind of those who imagine the evolution of technology in the next decade. Guided by technology every minute and constantly connected to the Internet, the man of the future seems like a part of an ever-expanding virtual gear. Adobe Romania’s CEO Alexandru Costin, believes that we are now at a crossroads in every fi eld and especially in IT, when the speed at which knowledge is acquired and innovation is applied has become exponential. He thinks this speed will maintain for decades from now on.
     

    TELECOM
     Universal gadget –  Over the coming years, the phone will continue its metamorphosis, from a mobile terminal we can use to talk to sort of a Swiss army knife capable of doing everything. Or at least something more than it does today. Mihnea {erbu, senior product manager of Orange Romania says, ”The phone will continue its transformation along with the technology: camera, internal memory, screen, size and uses.” Therefore we will have a portable computer on our hands: ”We will soon see a phone that will be part of the computer family, equipped with processor, graphics memory or hard drive.”

     

    LABOUR MARKET
     Fle-xi-bi-li-ty – How we will work in the future will obviously depend on the health of the world economy. Yet demand for productivity and efficiency will increase, regardless of the context. A phenomenon, though helped by the crisis, which was already a trend, is the shift from permanent employment contracts to working with independent contractors. The shift to this system will also entail adjusting internal processes of companies. Most contracts with independent contractors are signed for singular projects, which generates fl exibility both for companies – which can get top specialists without having to hire them for an indefinite period of time and for specialists, who can choose only those projects they are interested in.
     

  • Around the World for a Website

    Two years ago, Ciprian Enea (35) left the company he had founded in 2001 in the hands of his new business partner and left on a very long trip. For over a yearís time he travelled from the Taj Mahal to East Timor and from Nicaragua to Argentina. It was worth the effort, says Enea, because today he owns together with his partner Giani Holban (33) the first travel website in Romania with user-generated content. TVTravel.ro gathers hundreds of short films made during Eneaís travels, as well as of the over 100 users that have already signed up with the website.

    The investment that went into releasing the first Youtube for travel buffs onto the market amounted to around 250,000 euros, of which only 100,000 euros were spent on developing and actually launching the website. The rest of the money -150,000 euros – covered Eneaís travels and came in equal share from his own resources and from a partnership with travel agency Prestige Tours, held by businessman Mircea Vladu. This year another 75,000 euros will be invested in development and in the next round of travels that Enea will embark on, this time to Japan, Korea, Papua New Guinea and Taiwan. However, the two founders say they will not see a profit from revenues collected by TVTravel.ro in the next two years.

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican

  • A Matter of Speed

    ”To be honest, at the end of last year I thought the first bankruptcy I would hear about on the low-cost airline market would be Wizz Airís,” Stefan Mladin, manager of the Baneasa Airport, the main gateway for low-cost flights in Romania, said last week. Mladin is one of the first people to get a feel the market from the pace at which airlines operating on Baneasa request their slots and had felt a significant slowdown of demand from Wizz Air at the end of last year.

    Early in 2009, however, the Hungarian company got a capital inflow and resumed growth. Sky Europe, on the other hand, had significantly reduced the number of flights in Romania by mid last year, when it was operating only two flights from Bucharest and had given up part of its fleet, keeping only five aircraft. Back then, the Slovaks at Sky said they kept only two flights on Baneasa as a result of the partnership they had signed with MyAir (an Italian company that has been operating flights to Italy and France from Baneasa since 2005), which allowed them to operate only on the markets not served by the Italian operator.

    ”The partnership between Sky Europe and MyAir only entailed selling tickets on the website, with the two companies deciding to complement their flight portfolios by booking seats in each otherís aircraft, but have never operated together,” explains Alina Rus, MyAir manager for the Romanian market. Over the last two years, the Slovakian company has not received any capital inflows from its shareholders, and its shares on the Vienna Stock Exchange, where it is listed, have had a preponderantly negative performance. Sky Europe had started out in 2001 with enough funds from its shareholders, and its fast development drove the national airline carrier out of the market.

    At the end of March this year, the company announced a 31.9 million euro net loss for the first half, while debt stood at more than 100 million euros. After these results were published, the officials of the company in Bratislava tried a number of strategies to rebound, but last week they filed bankruptcy-law protection to be able to start a reorganisation and streamlining programme. The last campaign conducted by those at Sky Europe was one in which they sold 1 million tickets for 1 euro each, which made more than 100,000 CEE passengers buy tickets for this summer. The company announced it will operate the flights, but problems began soon after announcing bankruptcy on several airports to which Sky Europe owed money. Low fare campaigns have been the main weapon used to gain market share by low-cost airlines in Romania over the past year.

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican

  • Good bye, Rompetrol

    At 3 p.m. last Friday, two press releases announced the sale by Dinu Patriciu of the last 25 percent in Rompetrol. Over the following few hours, nobody would comment on the sale. Everyone was waiting for somebody else to start talking ”on the record” about one of the most eagerly awaited deals in Romania. All with whom BUSINESS Magazin tried to talk on Friday evening brought up a few common points: how much Dinu Patriciu sold for is not that important, how he did it is.

    The deal was announced by two press releases: one sent by KazMunaiGaz, whereby chairman Kayrgeldy Kabyldin said the acquisition of the last stake of Rompetrol was in line with KMGís strategy to develop abroad, and the second release came from Dinu Patriciu, who said he had decided to exercise his right to sell to KMG the remaining 25 percent stake in Rompetrol Group. That the two parties did not send a joint release says one important thing about the relationship between the Kazakhs and Dinu Patriciu. ”I believe Dinu Patriciu has never had a very good relationship with those to whom he sold the business, but I think that by selling Rompetrol, he made two masterful moves in this time of crisis,” said one of the businessmen in the petroleum world interviewed by BUSINESS Magazin.

    The price at which the sale was done is an interesting topic, too. According to sources on the market, last weekís sale was tightly connected to the sale in August 2007, when Dinu Patriciu and Phil Stephenson sold 75 percent in Rompetrol to the Kazakhs at KazMunaiGAz for 1.6 billion dollars, with the company thus valued at 2.2 billion dollars. Patriciu is the winner of the crisis twice, because with the deal sealed two years ago he checked, as he sold, before the crisis, a company whose rating has significantly gone down in the meantime. He now checkmated: he sold at a time when the crisis is in full swing and also escaped the deadline of the debts (which is June 2010). According to sources on the market, the contract initially signed by Patriciu included a mention that the sale of the 25 percent was to be done at a price at least equal to the company estimate in 2007. If we take that estimate into account, Patriciu collected approximately 533 million euros for the 25 percent. Even though he sold, Patriciu is still involved in the court case of Petromidia privatisation.

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican

  • Digital Revolution in Cinemas

    Soon, Romania will also benefit from the new technology that allows Christian Bale to plunge into the audience, and fans to shake Bono’s hand at a U2 concert. At the end of last year, the first 3D film featured on Romanian screens, ”Journey to the Center of the Earth” became the most profitable movie of all time on the Romanian market, collecting almost 2 million RON at the box office, although critics on the international market deemed the movie as mediocre.

    So, critics concluded, it was technology that made the difference, not the love story on the most famous boat in history. Cinema operators, inspired by the unexpected success of the start of the digital revolution in Romania, now compete in the field of technology. ”Our experience tells us that in Central and Eastern Europe, whenever a significant infrastructure was created, the number of annual visits per capita approached those in Western Europe, and we think the same will happen on the Romanian market,” says Corina Gonteanu, marketing manager of Cinema City, a part of Cinema City International, the largest multiplex network in Central and Eastern Europe.

    According to company data, Romania ranks last in Europe in terms of the average number of cinema visits per capita, with 0.2 visits a year. That compares with 0.3 visits in Bulgaria, 1.5 in Hungary, 0.9 in the Czech Republic, whilst Ireland is at the top of the ranking, with 4.5 visits. ”Romania could easily reach 0.7-1 if the infrastructure is developed, and the number of tickets could rise five-fold. In Warsaw, for instance, where there are 8-9 multiplexes, the ratio of visits exceeds 3,” says Moshe Greidinger, CEO of Cinema City International. In this context, Cinema City will open the first IMAX (Image MAXimum) within the AFIPalace Cotroceni mall in October.

    The IMAX will be part of a 21-screen, 4,300-seat megaplex. IMAX, considered to be the largest cinema in the world, actually amounts to a three-dimensional experience lived on a large scale. The screen, which is the size of an eightfloor building (18 metres high and 24 metres wide) is curbed in order to fill the peripheral vision of everyone in the audience. ”The investment in the IMAX system is worth around 1,8 million euros,” says Greidinger. The IMAX in Bucharest, a 400-seat cinema, will feature both 40-50 minute-long documentaries, and Hollywood productions.

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican

  • Customisation

    The idea came during a friendly chat with the marketing manager of the Dinamo club, Mircea Copaci. The Dinamo official wanted the football team to have a uniform image, consistent with the demands of the big international clubs. The first order for such clothing came from Dinamo Sports Club in 2006 (around the same time Bigotti had a similar contract signed with rival football team Steaua). ”The first official appearance of the team wearing the shirts we created was at a game with England, with Everton, and Dinamo then won 5 to 1,” the Dinasty representative recalls.

    Custom-made collections for company employees are a business with good prospects in fashion retail, which can bring money, but entails significantly lower costs than classic retail. However, this niche is as yet little explored in Romania – those who have tried this business model can be counted on the fingers of one hand. There has been demand for such clothing from companies in Romania for many years, but they had to resort to classic retail stores, in the absence of firms specialised in corporate clothing. ”A company’s image means much more than letterheads and business cards,” says Gabriel Muraru, who decided to launch a new division within the company he controls, dedicated exclusively to business wear for corporate employees (from suits to shoes and to cufflinks). Last year, before a clear strategy had been devised for this segment, orders for corporate clothing accounted for 5% of the company’s 6 million-euro turnover.

    The amount was, however, enough to persuade Muraru that this project would work. The specialised division should, of course, have contributed much more to the 2009 turnover, and Dinasty representatives admit that the timing for launching the division onto the market was not the best. Gabriel Muraru is aware that providing clothing for employees is not a priority in companies’ spending budget at this time. However, ”image counts in a time of crisis, as well,” says the Dinasty shareholder, who has started the new business with tens of signed contracts. Its clients include Coca- Cola, European Drinks, Ursus, Perroni, Banca Transilvania, Automoldova, Mobexpert, Iptana, Transgaz, Terapia Cluj, Antibiotice Iasi, Neocity, Rifil and Baumit.

    Traducere de Loredana Fratila-Cristescu si Daniela Stoican