Polish companies boosting outward FDI

By bne IntelliNews June 9, 2011

Bogdan Turek in Warsaw -

Polish entrepreneurs needed almost a decade to gain experience and confidence in investing abroad, but their presence on foreign markets, although still small, has grown more than 30% since Poland joined the European Union.

Outward FDI flows from Poland reached no higher than €277m between 1996 and 2000, but jumped to €2.6bn in 2005, the Polish National Bank's (PNB) archives show. "The breakthrough came in 2004," said an official from the PNB, who points to the huge boost since. "The data on outward foreign investment after three quarters of 2010 add up to about €35.5bn," the official added, suggesting that's fairly impressive compared with the €139bn of incoming foreign capital by the end of the third quarter.

The management of Polish companies investing outside the country's borders say they need to look to other markets in order to grow. Piotr Piatas, the deputy CEO of Comarch, a software house headquartered in Krakow, says the Polish market was already saturated with the company's IT solutions, so it started investing abroad 10 years ago. Comarch is now one of more than 1,000 companies, compared with 691 in 2005, which have acquired stakes in foreign companies or opened their own branch offices abroad.

"We had to go abroad to widen our client base," Piatas said. Darius Ner, the CEO of Comarch in Chicago, says the decision to open an office in United States was a daring experiment. "Finding the first clients on the US market was a problem due to a lack of local references and lack of trust in technologies that are not American." However, Comarch now has pushed its expansion to 13 offices across Europe, North and South America, Asia and the Middle East.

According to the Ministry of Economy's press office, the number of Polish companies making investments overseas is also expanding rapidly. Whilst no more than 39 took the plunge in 2006, a total of 208 committed capital outside the country in 2007, and the upward trend continues as the impact of FDI on companies becomes clearer. "The operation of Polish companies abroad has a positive impact on their financial condition," reads an analytical report by the ministry. "They generate good profits and their competitive position is stronger than that of companies operating only at home."

Turning crisis into opportunity

For some of these Polish companies, the global economic crisis was an opportunity to make their move. When three Romanian companies owned by Romcolor Group and producing paints, cement and plaster compounds got into trouble last year, Polish paint and glue producer Atlas Group leapt to buy majority stakes. CEO Henryk Siodmok says he's delighted with the decision, which means Atlas can sell on several new markets, including Hungary, Serbia and Moldova, and adds that the company already plans a €5m expansion in Romania.

Meanwhile, Selena - a Polish manufacturer and distributor of construction chemicals - pounced in Spain in 2009 when Industries Quimicas Loewenburg (Quilosa) was near bankruptcy. "We bought a 51% stake in Quilosa," Selena's deputy CEO Kazimierz Przelomski explains. "The funds stabilized the company's financial situation whilst the acquisition has increased our production capacity and our share on the western market."

Just across the Mediterranean in Italy, Boryszew Group claims that its acquisition of air-conditioner manufacturer Maflow last year has seen it become one of the 100 biggest auto equipment producers in the world, with sales swelling to €1bn annually.

However, whilst these success stories should inspire other Polish companies to look to expand their horizons, it's early days yet. "We have only a 0.2 % share of global capital transactions, and an 0.4% share of those in Europe," says Slawomir Majman, CEO of the Polish Information and Foreign Investment Agency. "It will take time before the conditions become mature enough in many big, medium-sized and small companies to increase that share."

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