RSM Romania_Business Brief_25-29.07.2016

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THE BUSINESS WEEK IN ROMANIA
25 – 29 July 2016

MACRO
• Reduced confidence in the economy
The CFA Romania macroeconomic confidence index
fell by 7.3 points to 58.5 points in June. The current
conditions index was 71.6 points, down 5.5 points, and
the expectations index fell 8.3 points to 51.9 points,
the lowest level since November 2014. The expected
Euro/Lei exchange rate for the next six months was
4.5500 (an increase of 500 pips), and the twelvemonth
forecast was 4.5375, an increase of 375 pips.
The expected inflation over the next twelve months
(July 2016-July 2017) was 2.00%, an increase of 0.55%
on the previous financial period. CFA Romania launched
its Macroeconomic Confidence Index in May 2011.
Polling is conducted among financial analysts at the
end of each week. The index, between 0 (complete
and utter lack of any confidence whatsoever) and
100 (full and unflinching confidence in the Romanian
economy), is calculated based on six questions relating
to current business and labour market conditions and
expectations regarding the business sector, labour
market, personal income, and personal wealth. The poll
also gauges expectations as to the rate of inflation,
interest rates, exchange rates, global macroeconomic
conditions, and oil prices over the next twelve
months. CFA Romania is an association of investment
professionals, most of whom hold the title of Chartered
Financial Analyst (CFA), a qualification administered
by CFA Institute USA. CFA Romania currently has one
hundred and eighty members.
• More home loans in June
The banks granted more mortgages in June than in
the previous month, although many of them have
tightened lending conditions since the Commissioning
Payments Law came into force on 13 May. The amount
of home loans increased by almost a billion lei in June,
reaching 55.6 billion lei. The banks also benefited from
state guarantees in the First Home programme in June,
after the government allocated a ceiling of five hundred
million lei, which, however, was quickly used up. For the
banks at the top of the league in terms of assets, First
Home now accounts for ninety per cent of their new
mortgage portfolios. Six in ten loans are First Home
loans. Such loans, with an advance payment of just
five per cent, are excluded from the Commissioning
Payments Law. For standard loans, the banks have
increased the advance borrowers are required to pay
from an average of fifteen per cent to between twenty
and thirty-five per cent. Since the beginning of the
year, home loans have increased by 3.7 billion lei to 24.4
billion lei, while foreign currency home loans decreased
by two billion lei to 31.2 billion lei. This rate of growth will
be viable only if the government allocates further First
Home guarantees.
• Austrian investors demand “friendly” policies
Around seventy per cent of Austrian investors in
Romania are satisfied with conditions here, and
forty-four per cent have plans to make investments
in the next two years, but they are pessimistic as to
the future and demand “a friendly economic policy
towards entrepreneurs” political stability, transparency,
less bureaucracy, and more professional training,
according to a study carried out by the Austrian
Embassy. Austrian companies have invested 9.7 billion
Euros in Romania, equivalent to 16.1% of total direct
foreign investments in Romania. The more than seven
thousand companies with Austrian capital in Romania
employ more than one hundred thousand people.
The main Austrian investors in Romania are OMV,
Erste, Raiffeisen, Holzindustrie Schweighoffer, Vienna
Insurance Group, Uniqa, and Grawe.
• Romania/E.U. – six-month balance sheet in the black
In the first six months of 2016, Romania received 3.9
billion Euros from the E.U. and contributed 700 million
Euros to the E.U. budget, giving a positive balance of
3.2 billion Euros. Of the funds received from the E.U. in
the first six months of this year, 2.4 billion Euros were
structural funds, 631 million Euros rural and fisheries
development funds, 496 million Euros agricultural
subsidies, and 285 million Euros in the category of
“other sums.” In order to achieve budget absorption,
it is essential that the State be the main beneficiary of
E.U. funds, with money going on major infrastructure
projects: motorways, railways, the environment. At the
end of June 2016 the total structural funds obtained
from the E.U. for the 2007-2013 period was 13 billion
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MACRO
• Euros (11.2 billion Euros in December 2015), with the
rate of absorption climbing to 69% of the total 19 billion
Euros allocated. Since integration in 2007, Romania has
received 37.4 billion Euros from the E.U. and contributed
13 billion Euros, resulting in a positive balance of 24.5
billion Euros, or 15.5% of GDP for 2015.
Sources: Wall-Street, Ziarul Financiar, Adevărul,
Agerpres, Profit.ro
BUSINESS
Carpatica Asig to go bust
The Board of the Financial Supervisory Authority has
decided the fate of the insurance company owned
by millionaire Ilie Carabulea, which is to be declared
bankrupt, given that the Deloitte report also shows
that liquidation will be 150 million lei cheaper than
continuation of the resolution stage. According to the
said report, the Insurance Guarantee Fund will have to
spend around 650 million lei to compensate Carpatica
Asig clients and their third-party claimants. The scale
of the Carpatica Asig bankruptcy is a lot smaller than
that of Astra Asigurări, however, which might suggest
that the Deloitte estimates are exaggerated. Carpatica
Asig is said to have 26,000 damages cases, each with
an average value of 1,500 Euros. In contrast, Astra had
more than 57,000 cases when it went bankrupt. Almost
all the Carpatica cases are RCA policies, whereas Astra
also handled complex maritime and aviation cases.
Carpatica is the third insurance company to go bust in
the last two years, after Astra and Forte.
• SecureWorks rents 3,000 square metres in
AFI Park 4&5
SecureWorks, a supplier of computer security services,
has rented around three thousand square metres
of office space in AFI Park 4&5. With 32,000 square
metres of office space, AFI Park 4&5 is now seventy
per cent occupied by multinational companies, including
Cameron, SII Romania, ORTEC Central & Eastern Europe,
FotoNation (a Tessera company), and VEEAM Software.
The new tenant, SecureWorks, has a portfolio of more
than 4,300 clients in fifty-nine countries.
• Swiss trader Repower sells its Romanian business
Swiss energy trader Repower, which has a market
share of more than five per cent in Romania in the
small- and medium-sized businesses sector, supplying
electricity and gas to clients include Mega Image,
Nestlé, Ford, McDonald’s and Carrefour, is selling its
Romanian business to MET Group, another Swiss
company. The transfer will be concluded in September.
MET is present in ten European countries. In May,
Repower, announced that low prices on international
markets, as well as an unfavourable exchange rate had
led to poor results in the 2015 financial year, with an
operating profit (EBIT) of -69 million Swiss francs and a
net loss of 136 million.
• 24 companies to receive state aid to create new jobs
More than twenty companies are to receive state
regional development aid to create jobs. The total sum
of the aid is more than 100 million lei. Thirty-three
companies applied for aid, promising to create around
five thousand new jobs, and twenty-three applications
were successful. The largest sum is to be received
by Webhelp Romania, a call centre that undertook to
recruit around 460 staff if it received state aid of 16.9
million lei. Vehicle parts producer Yazaki applied for
15 million lei and will create more than 800 jobs at its
factory in Brăila. Other successful applications were
made by UPC, a cable company that is part of U.S. giant
Liberty Global, which has set up two new companies for
this purpose: UPC Services and UPC External Services.
Also successful was Flying Trade Group, a British outfit
that is to open a frozen food factory in Bihor, receiving
6.9 million lei in aid and recruiting 244 staff.
• Impact of Ahold-Delhaize merger on Mega Image
operations in Romania
The international merger of Belgian company Delhaize
and Dutch company Ahold will not have any significant
impact on Mega Image operations in Romania. The
visual identity of Mega Image, owned by the Belgian
retail giant, will remain unchanged, but it is possible that
investments might increase as a result of the merger,
which will create a twenty-two-brand retail giant with
6,500 shops in eleven countries. Mega Image, which
has 482 shops and a turnover of more than 3.5 billion
lei, will retain its strong local identity.
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BUSINESS
• The chain, which is the largest in Romania, with 216
Mega Image supermarkets and 264 Shop&Go local
stores, will continue to expand, reaching 500 shops in
Bucharest and the surrounding area, where eighty per
cent of its shops are currently concentrated. Delhaize
has invested around fifty million Euros in Romania
hitherto, sometimes opening more than one hundred
shops in a single year.
• Argentinian to become CRH Romania boss
CRH Romania, one of the largest local building materials
producers, has appointed Gustavo Navarro (53) as
director general. Navarro, who is Argentinian, has
worked for more than a decade in the building materials
industry in South-Eastern Europe and Russia. CRH
Romania owns cement factories in Medgidia and
Hoghiz, a machinery station in Tîrgu Jiu, and a network
of cement terminals, quarries, aggregates deposits, and
concrete stations throughout Romania. The previous
CRH director general, Costin Borc, has taken up a
position in the Ministry of the economy. CRH Romania
is the country’s second largest cement producer, with
a turnover of more than 220 million Euros last year and
steady profits of around fifteen million Euros.
Sources: Wall-Street, Ziarul Financiar, Curierul Național,
Profit.ro, Bursa
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