In Pole position to succeed

By bne IntelliNews April 27, 2009

Pat Koza in Warsaw -

In the midst of a global recession, a significant number of Polish companies are thriving. And those doing better than their regional peers cite at least two common factors contributing to their growth: one is diversification; the other is flexibility.

Take Solaris Bus & Coach, a family-run business based in the town of Bolechowo, near Poznań, which sold 1,037 buses in Poland and a dozen other countries in 2008, generating turnover of PLN1.055bn (around €300m). It plans to top that by 15-20% this year, anticipating sales of 1,200 vehicles. "Our order books are full and we look forward to the rest of the year," Solaris founder Krzysztof Olszewski tells bne.

The economic turndown naturally helped Solaris by making buses more popular with consumers wanting to save on car costs, but Olszewski also credits the company's strategic decision to diversify a few years back. As a result, this year Solaris will launch a new interurban bus, sized between a city bus and an intercity coach, as well as enter the tramway market. The company hopes to sell 50 tramways annually within the next three to five years. Solaris has also begun R&D on a purely electric vehicle. "We see the potential for development within the next two or three years," Olszewski says.

The second key to success has been the firm's ability to change direction quickly. "Among our competitors, we are the only family company which makes us quite flexible in decision-making, design and the key technical features of the product," Olszewski says. "If the customer wants a different solution, we can react much faster than the others."

Diversification is also a contributing factor to the success of Polimex Mostostal, one of Poland's largest construction companies and the only major builder without a foreign strategic partner. Polimex announced recently that first-quarter revenue is expected to grow by less than the 20% it had planned, but net margins will be on track at more than 3%.

EU structural funds are co-financing about half of Polimex's projects in 2009, which helps prime the pump in Poland's fastest-growing sector. About €28bn will be spent by 2016 on infrastructure alone, including 800 kilometres of roads and refurbishment of six stadiums to prepare Poland for the Euro 2012 football finals. But a decision to merge with steel products maker Mostostal Seidlice in 2004 and to diversify into road and railway construction deserves at least equal credit for Polimex's current market position. Sales nearly tripled from PLN1.85bn in 2005 to PLN4.3bn in 2008, and the company expects another growth spurt of 15-20% this year.

With its position already well established on nearly all segments of the construction market, company strategy is to focus on organic growth while keeping costs under control, with no M&A anticipated for the next two years.

"We are proud that we read the future markets several years ago," Marek Gabarek, head of investor relations for Polimex, tells bne. "Certainly we feel we can weather the economic slowdown."

Although Poland's automotive sector has been hard hit all along the supply chain, there are bright spots. Top domestic producer Fiat hit a bull's eye with its new 500 model as Fiat's Polish factories produced half a million cars in 2008, 97% of which were exported, says Fiat Auto Poland spokesman Bogusław Cieslar. This year is even better: exports to Germany quadrupled to 26,000 vehicles in the first quarter of 2009 compared with the same period in 2008, as thousands of German owners of cars over nine years old took advantage of a new "environmental bonus" of €2,500 to junk their smelly old bangers and buy new environmentally-friendlier wheels. Given that owners of nine-year-old cars in crisis conditions aren't likely to fork out for a brand-new Merc, BMW or Audi, this €2,500 is going toward a cheap, small car. "Our factory in Tychy producing the Panda model, the Fiat-500 and Fiat-600 is working at full steam," Cieslar says.

All over Poland, companies in a wide range of sectors appear ready to invest in the future despite the crisis. A survey by the Polish Confederation of Private Employers-Lewiatan found that 60% of companies employing over 250 people plan some investments in 2009-2010, and one-fourth expect the global situation to have no negative impact on their business. "When I look at the kind of investments these companies made in 2007-2008, maybe this was a completely new strategy for Polish companies," said Malgorzata Starczewska Krzysztoszek, director of the confederation's economic analysis department. "They were making investments in innovation. Their strategy gave them the possibility to develop, to introduce on the market new products and services. They are prepared for the crisis."

One such example is Fakro, a company based in Nowy Sącz in southern Poland, which holds 15% of the world market for roof windows. It plans to beef up its 3,000-strong workforce this year amid rising sales. "Fakro is a global company, so its actions are different on different markets," says Ryszard Florek, who in 1991 founded the company that now has five manufacturing subsidiaries in Poland and 12 sales subsidiaries abroad. "There is, for example, total stagnation in Ukraine, but otherwise we are able to recognize great growth on the German and French markets."

Nimbleness and diversification plays a big part here as well. "We have prepared for a time of crisis many new products that should suit all clients' tastes – not only those earning less, but also for those having a better material status," Florek says. "We are a flexible company and our reaction to change tends to be accurate and quick."

While not anticipating rapid market growth, Fakro expects a promising 2009. Asked what advice he might have for other companies on how to deal with the crisis, Florek says: "Stay calm and look with optimism to the future."

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