Poland Today Business Review+ No. 018

No. 018 / 13th January 2014 / www.poland-today.pl / magazine, conferences, portal, newsletter

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HEALTHCARE British firm McKinlay Development open their first Polish retail park page 11

MANUFACTURING & PROCESSING

Top floorboard maker Barlinek to be delisted from Warsaw bourse page 2 Furniture plant closure to render 419 people jobless in Szczytno page 2

BANKING & FINANCE

WSE capitalization sets new record in 2013 page 3 Coface reports 883 bankruptcies in 2013 page 4

ENERGY & RESOURCES

PGE's giant power plant project to get underway in February page 4

PROPERTY & CONSTRUCTION Golub GetHouse to break ground on new office project in Warsaw page 5

OVO Wrocław development back on track with opening scheduled for 2016 page 6 Vantage Development building more offices in Wrocław page 7

TRANSPORT & LOGISTICS

Forwarder PEKAES expands intermodal capabilities with two major acquisitions page 8 Italy's Finmeccanica wins EUR 280m jet trainer tender page 9 German ferry operator opens new Trelleborg-Świnoujście service page 10

FOOD & AGRICULTURE

Nestle & General Mills to invest PLN 50m in Toruń cereal plant page 11

RETAIL & SERVICES

Poland's luxury goods market to hit PLN 13bn in 2016, says KPMG page 13

POLITICS & ECONOMY

Polish politician calls for Tesco boycott amid migration row with UK page 14

KEY FIGURES

Up-to-date macroeconomic figures, currency & stock market data and lots of other hard-to-find info pages 15-17

With 31 Cinema City locations in the country, Poland is the company's key market. Photo: Cinema City

UK's Cineworld acquires Cinema CityUK's Cineworld acquires Cinema CityUK's Cineworld acquires Cinema CityUK's Cineworld acquires Cinema City British cinema operator Cineworld has agreed to acquire Warsaw-listed Cinema City International's movie theater business in Central & Eastern Europe and Israel. The GBP 0.5bn cash and share deal creates the second largest cinema chain in Europe, with 201 cinemas, and makes Cineworld the No. 1 player in Poland. page 12

weekly newsletter # 018 / 13th January 2014 / page 2


Top fTop fTop fTop floorboard maker loorboard maker loorboard maker loorboard maker Barlinek to be delisted Barlinek to be delisted Barlinek to be delisted Barlinek to be delisted from Warsaw boursefrom Warsaw boursefrom Warsaw boursefrom Warsaw bourse

Polish billionaire Michał Sołowow is squeezing out minority shareholders from the Warsaw-listed floor-board producer Barlinek. The entrepreneur, who pri-or to the buy-out, had held a 94% stake in the business, will become its sole owner on 14th January, 2014, after which he intends to delist Barlinek from the Warsaw Stock Exchange.

Barlinek's net result in PLNm

-40

-20

0

20

40

60

2006 2007 2008 2009 2010 2011 2012

Source: Barlinek

Barlinek is Poland's largest distributor of wooden flooring, skirting boards, and sawdust pellet. Its floor-boards are being exported to 55 countries worldwide. Although Barlinek has maintained a strong brand and a leading position on Poland's wooden flooring mar-ket, the company was badly hit by the financial crisis, or more precisely, by the recession in the residential sector that came with the credit crunch. Back in 2007

Barlinek was worth more than PLN 1bn, but its capi-talization has since gone down to PLN 230m. Huge profits got replaced by enormous debts (approximate-ly PLN 500m), making creditors impatient. In 2012 the company turned over PLN 690m and posted a net loss of PLN 36m. Before the crisis, in 2007, it boasted had a PLN 59m profit on revenues of PLN 488m. Last year Sołowow engaged in talks with creditors, hoping to find a sustainable way out of the woods for the company. The banks asked the billionaire to inject Barlinek with PLN 110m in subordinate financing. Sołowow admitted in October last year that Barlinek's listed status was becoming a bit of a problem, as mi-nority shareholders could potentially stand in the way of any bolder restructuring moves. He has therefore decided to take full control of the business, first though a buyout bid, which boosted Sołowow's stake in Barlinek from 72% to more than 94%, and then a minority squeeze-out.

Barlinek produces more than 9m sq.m of wooden floorboards annually. Photo: Barlinek

Besides Barlinek, Sołowow owns Poland's top wall & floor tile and bathroom fittings maker Rovese and a few weeks ago he added the flooring & carpet retailer

Komfort to the mix. Outside of the home improve-ment segment, Sołowow is the main investor behind the Warsaw-listed chemical group Synthos.


FuFuFuFurniture plant closure rniture plant closure rniture plant closure rniture plant closure to render 419 people to render 419 people to render 419 people to render 419 people jobless in Sjobless in Sjobless in Sjobless in Szzzzczytnoczytnoczytnoczytno The pan-European furniture group IMS has decided to shut down one of its Polish manufacturing plants, re-sulting in 419 redundancies. The FS Favorit Furni-ture factory is one of the largest employers in the town of Szczytno, 150km north of Warsaw. It makes a range of furniture for the living, sleeping, and dining furniture markets. "The company does not generate profits and its overall economic situation gives little hope for the business to regain profitability in a reasonable time frame. Follow-ing an economic assessment a decision has been made on the closure of the facility," the plant's managers wrote in a letter to the local job centre. The latter's representatives told the press agency PAP that pro-duction will be maintained until April and FS Favorit Furniture indents to fulfill all of its obligations to em-ployees and subcontractors. The closure of the plant will leave 419 people without work, almost all of them production staff. According to Jan Dąbrowski, head of the Szczytno employment of-fice, the region has not seen a group layoff of that size since mid-1990s. An estimated 6,340 people in the Szczytno county are jobless at the moment, which translates into an unemployment rate of 24%. The la-bor market in Poland's northeastern Warmińsko-Mazurskie region has long been the most difficult of


all of Poland, with one in five residents unable to find work. FS Favorit Furniture will have to pay back some PLN 4m worth of EU aid it had obtained for "introduction of innovative production technology," a PLN 10m pro-ject that was aimed at boosting the company's compet-itive position. Based in Bendern, Liechtenstein, IMS Group designs, develops and produces upholstered and wooden furni-ture in various styles and price categories and turns over approximately EUR 200m per annum. With dis-tribution in more than 25 European countries, the company has more than 3,000 employees at produc-tion facilities and distribution units across Europe in-cluding, Liechtenstein, Poland, Germany, Hungary, and the Netherlands. Its Polish operations include couch maker Etap Sofa and the Bydgoszcz-based Bydgoskie Meble. IMS belongs to the New York-based private equity company Berggruen Holdings.


MachiMachiMachiMachinery firm nery firm nery firm nery firm EnergoEnergoEnergoEnergo----Metal System Metal System Metal System Metal System expands Gliwice unitexpands Gliwice unitexpands Gliwice unitexpands Gliwice unit Energo-Metal System Polska, a subsidiary of glob-al machinery maker EMS (European Manufacturing Solutions) is significantly expanding its Polish unit in Gliwice near Katowice. The company has leased 2,000 sq.m of industrial and warehouse space with staff fa-cilities at Gliwice's Portowa 74 industrial and logistics centre, reported property consultancy Cushman & Wakefield, which represented the landlord SILS Centre Gliwice.

Energo-Metal System Polska provides a wide range of machines for use primarily in the food industry, in-cluding dryers for beverage cans. The head office of Energo-Metal System Polska is located in the Gliwice section of the Katowice Special Economic Zone (SEZ), where the company has a production unit of 3,700 sq.m In addition to Gliwice, the EMS Group also oper-ates in the United Kingdom (with a HQ in Altham, Lancashire) and China (Hogn Kong and Foshan City). "Energo-Metal System Polska is the exclusive manu-facturer of dryers used in can manufacturing in Po-land. The facility in Portowa Street, where it has taken up new space, is located very close to its head office. The new warehouse was opened in July 2013," Wojciech Dachniewski, senior negotiator from Cush-man & Wakefield's industrial department.

EMS secures additional space in Gliwice. Photo: C&W

Portowa 74 is a modern industrial and warehouse building in the immediate vicinity of the Gliwice Sub-zone of the Katowice SEZ. It offers 8,000 sq.m of in-dustrial and warehouse area and 1,000 sq.m of space for office and staff facilities. SILS Centre Gliwice, the owner of Portowa 74, belongs to Germany's

Ferrostaal Automotive Group and Preymesser GmbH Group.

BANKING & FINANCE

WSE WSE WSE WSE capitalizationcapitalizationcapitalizationcapitalization setssetssetssets new recordnew recordnew recordnew record in 2013in 2013in 2013in 2013

The market capitalization of domestic and foreign en-tities listed on the Warsaw Stock Exchange in-creased 15% last year and totaled PLN 840.8bn, in-cluding PLN 593.5bn worth of domestic stocks, the WSE said in an annual summary. The average daily trading volume came to PLN 891m, which represented an 18% growth. The blue chip index WIG 20 shed 7% last year, whereas the new main index WIG30, intro-duced in September 2013, dropped 1.8%.

WSE capitalization in PLNm, year-end*

0

100

200

300

400

500

600

1997 1999 2001 2003 2005 2007 2009 2011 2013

Source: WSE *) domestic stocks

The Warsaw bourse hosted 23 IPOs on the main mar-ket as well as 42 listings on its alternative trading plat-form NewConnect, which, in turn, boosted the total number of listed companies to the respective 450 and


445. NewConnect stocks (domestic and foreign) were valued at PLN 11bn as of end of last year. Initial public offerings on the main market amounted to PLN 5.135bn, whereas secondary offerings topped PLN 2.617bn. The Catalyst bond market welcomed PLN 4.379bn worth of newly issued bonds that raised its total value by 12.6% to reach PLN 58.9bn. As of end of December 2013 a total of 175 companies had their bonds listed there. Other major developments on the WSE last year in-cluded the introduction of the new Universal Trading Platform (UTP), purchased from NYSE Technolo-gies in April and the August acquisition of a 30% stake in the UK-based trading platform Aquis Ex-change Ltd, which launched at the end of November, enabling trading in top British, French and Dutch se-curities. The Warsaw exchange has also engaged in talks regarding a potential merger with CEESEG, which groups a number of Central European bourses, including Vienna, Prague, and Ljubljana.

BANKING & FINANCE

Coface reports 883 Coface reports 883 Coface reports 883 Coface reports 883 bankruptcies in 2013bankruptcies in 2013bankruptcies in 2013bankruptcies in 2013

Although the number of bankruptcies in Poland in-creased by merely 1% last year, the 2013 was the worst year since 2005, with 883 companies going under ac-cording to Coface. The credit insurer noted, however, that the negative trend saw a much-awaited reversal in the final quarter of 2013. In Q1-Q3, there was a 10% y/y increase in bankruptcies, following a 21% rise in the whole of 2012.

Still, however, the last year saw 115% more bankrupt-cies than the 2008 and 22% more than the 2009, when the global economic crisis was at its worst. "The 2013 was not particularly favorable for a majority of Polish companies," commented Grzegorz Sielewicz, Coface's chief economist in Poland. "Their financial results were dented by a significant drop in private consumption, which peaked in Q1. Many businesses were forced to scale down their investment plans, with some also having to downsize employment."

No. of bankruptcies in Poland

0

500

1,000

1,500

2,000

1997 1999 2001 2003 2005 2007 2009 2011 2013

Source: Coface

The past 12 months proved particularly tough for the manufacturing industry, where 277 companies were declared bankrupt – an increase of 15% y/y. According to Coface, the financial problems experienced by Polish manufacturers are largely due to the crisis in the construction sector, which impacted the latter's suppliers and subcontractors. Coface data show 213 building firms go bankrupt last year, down from 218 in 2013, when their number increased by more than a half. Poland's trade and retail sector saw 214 insolven-cies last year.

Shrinking revenues were the key driver behind last year's bankruptcies, as they undercut the profitability of companies and, consequently, limited their access to financing amid growing risk aversion among banks. Coface expects Polish banks to stabilize and/or relax slightly their lending policies in 2014, which coupled with the anticipated pick-up in demand and record-low interest rates, should improve the economic envi-ronment in Poland, resulting in fewer bankruptcies. Polish companies may again feel confident enough to start investing, the credit insurer added. "Macroeconomic figures signal that the worst is over for the Polish economy and since mid-2013 it has been returning to the growth path. However, the upturn has so far been modest and gradual," commented Coface's Grzegorz Sielewicz.

ENERGY & RESOURCES

PGE's giPGE's giPGE's giPGE's giant power ant power ant power ant power plant project to get plant project to get plant project to get plant project to get underway in Februaryunderway in Februaryunderway in Februaryunderway in February Poland's top power utility PGE approved a program of internal financing for the PLN 11.6bn investment in Opole, which enables the company to launch the con-struction of two coal-fired 900 MW power units on February 1, in line with the schedule, PGE said. The new power units are to be operational approximately five years later. Announced back in 2012 as the largest ever project in Poland's energy sector, the planned expansion of PGE's Opole power plant has since suffered a number of setbacks due to protests from environmental activ-ists, problems with contractors and doubts over the economic feasibility of the entire undertaking. The


contract was initially awarded to a Polish consortium of Polimex-Mostostal, Mostostal-Warszawa, and Rafako, but after the main contractor Polimex-Mostostal barely escaped bankruptcy and had to be rescued by the state-owned Industrial Development Agency ARP, one of the subcontractors, France's Al-stom, came to the rescue and helped secure financing for the project.

The government believes new investments in Opole are crucial to Poland's energy security. Photo: PGE

A few weeks ago (see PT Business Review+ No. 12 page 4), Krzysztof Kilian, a long-time friend of Prime Minister Donald Tusk, resigned as CEO of PGE after refusing to give a green light for the Opole project. In Kilian's opinion, falling electricity prices put a ques-tion mark over the project's future profitability. The government, which holds a controlling stake in PGE, considers the development of new power generating capacities in Opole as key to the country's energy secu-rity due to the imminent closure of Poland's oldest and most polluting power stations, amid the country's growing appetite for power. Some experts argue that without huge new investments Poland may face black-outs as early as 2016. However, domestic and foreign environmental activists strongly oppose construction

of new coal-fired units, even though the country lacks a viable clean domestic alternative to coal, despite a robust growth of the country's wind energy sector. PGE's consolidated sales revenue rose 9% last year and totaled PLN 30.1bn, while its net earnings came to PLN 3.2bn. Its net electricity generation volume rose 1% and topped 57.05 TWh. The company has a 40% share in Poland's electricity production, and controls 26% of distribution. Besides the Opole project, PGE is responsible for building Poland's first nuclear power plant, with an estimated price tag of PLN 50bn.

PROPERTY & CONSTRUCTION

Golub GetHouse to Golub GetHouse to Golub GetHouse to Golub GetHouse to break ground on new break ground on new break ground on new break ground on new Warsaw Warsaw Warsaw Warsaw office project office project office project office project

Looks like Polish banks are finally warming up to property developers after several rather frigid years, as a number of projects that had first surfaced more than half a decade ago are finally about to see the light of day. One of them is Prime Corporate Center in War-saw's central business district, which was first an-nounced at the peak of Poland's post EU-accession property boom, only to be put on the back burner for many years. Prime Corporate Center was originally a brainchild of Irish developer Irlandzka Grupa Developerska (IGD), which got into financial difficulties and sold the site to the current owner, Golub GetHouse in 2012. Just recently, Golub GetHouse, a joint venture of US Golub & Company and Warsaw-based GetHouse Developer obtained EUR 50m financing for Prime Corporate Center from a consortium of mBank and

mBank Hipoteczny, the highly successful Polish units of Germany's Commerzbank. Czarek Jarząbek, management board president at Golub GetHouse, told Poland Today that the total capex on the 20,000 sq.m GLA project would come to EUR 75m. "We liked the quality of this project and the profes-sional way in which it had been prepared, its location in Warsaw's emerging central business district and Golub GetHouse's global and Polish track record, which includes developments such as the Warsaw Fi-nancial Center," commented Barbara Gębal, project manager at mBank's structured financing and mezza-nine department. The 23-floor Prime Corporate Center project will be located on Grzybowska Street in the Wola district of the Polish capital, close to the existing Hilton hotel and the Warsaw Spire office complex which is cur-rently being developed by Ghelamco Poland. With a new subway line set to reach this area this year, the Wola-Śródmieście border has been a hotbed of office construction in recent years. The Warsaw Spire in-vestment alone will deliver 100,000 sq.m of new office space there within the next two years. "Golub GetHouse has secured a valid building permit and financing for the project and we are currently fi-nalizing negotiations with potential tenants. Construc-tion will follow the signing of lease contracts, which should take place very soon. The general contractor will be named shortly and the building will be com-pleted in 2015," Czarek Jarządek tells Poland Today. Designed by the Solomon Cordwell Buenz and Ep-stein architectural studios, the scheme is expected to obtain BREEAM certification of energy efficiency and environmental performance. It offers column-free floor plates, floor to ceiling windows, rooftop terrace and comfortable driveway to main entrance.


"The site is ours by ownership, which guarantees that maintenance fees will be lower and stable over long term, unlike in developments where the investor only has perpetual usufruct rights to the land," says Mr, Jarząbek.

Prime Corporate Center will offer more than 20,000 sq.m of class-A office space at the edge of Warsaw's city centre. Photo: Golub GetHouse

Golub GetHouse is continously looking for land for new office and residential schemes in Warsaw. "In December 2013 we acquired a site and signed a joint-venture agreement with Mennica Polska regard-ing a 1ha site on 21 Pereca Street, on the corner of Żelazna and Prosta. Together, we intend to build two class A-office buildings there, a 130m-tall tower with a GLA of 51,000 sq.m and a smaller building with 14,000 sq.m of office space," Czarek Jarząbek tells Poland Today. Golub & Company has been present in the region since the early 90s and has completed a number of office schemes including the Warsaw Financial Centre (75,000 sq.m GLA), International Business Center

(58,000 sq.m), and Warsaw Corporate Center (10,000 sq.m) as well as some residential projects (Point 48, Platinum Plaza, Oligo Park) in Warsaw and its vicinity.

Warsaw office market Key indicators as of end of 1H 2013

Office zones Stock

sq.m

Vacan-

cy

Central locations 1,287,000 9.9%

CBD-Central Business District 501,000 11.4%

CCF-City Centre Fringe 786,000 8.9%

Non-central locations 2,724,000 10.8%

E-East (Praga) 172,000 9.8%

LS-Lower South (Puławska) 176,000 13.0%

N-North (Żoliborz) 135,000 9.0%

SE-South East (Wilanów & Sadyba) 188,000 2.2%

SW-South West (Jerozolimskie & Okęcie) 660,000 15.6%

US-Upper South (Mokotów) 1,105,000 10.5%

W-West (Wola) 288,000 6.4%

Total 4,011,000 10.5%

Source: CBRE H1 2013 Warsaw Office MarketView


OVO WrocławOVO WrocławOVO WrocławOVO Wrocław development back on development back on development back on development back on track with completion track with completion track with completion track with completion scheduled for 2016scheduled for 2016scheduled for 2016scheduled for 2016 The first time one heard of OVO Wrocław more than half a decade ago, when Poland's property market was booming and developers had little problem secur-ing financing for new property projects. With its futur-istic design, top location and Wrocław's first Hilton hotel, the 50,000 sq.m complex created quite a buzz when it was first announced. Unfortunately, Wings

Properties, the Israeli-owned developer behind OVO, wanted to break ground on the project in 2008, which made it susceptible to the global financial crisis and tighter lending policies that came in its wake. Without credit, Wings Properties had put OVO on the shelf un-til autumn last year. The breakthrough came at the end of November 2013, when Wings Properties secured full financing for the PLN 260m mixed-use project through a loan from Alior Bank. The developer itself is reportedly con-tributing more than PLN 100m to the project. The general contractor for the project is to be named shortly as Wings Properties hopes to begin construc-tion in Q1 2014 and complete the building two years later.

OVO Wrocław brings futuristic architecture to the Wrocław city centre. Photo: Wings Properties

OVO Hilton Wrocław will house high-end apartments, a hotel, as well as 8,450 sq.m of office and retail space. The five-star hotel will be opened under the Double-Tree by Hilton brand and will house 200 rooms and suites, conference rooms and a 6.5-meter high ball-room. Floors 4-6 will offer 140 apartments of various sizes, from 25-sq.m studio apartments to 250-sq.m penthouses. Apartments have been available for pur-chase since September last year with prices ranging from PLN 11,500 to PLN 26,000 per sq.m. The build-


ing will comprise nine storeys in total, with two below ground.

Designed by Gottesman-Szmelcman Architecture stu-dio, OVO will feature a dirt-resistant cylindrical façade made from DuPont's trademark solid surface material Corian that gave the designers more freedom to play with the building's form. Located in the centre of Wrocław, on Podwale Street, the scheme will include a 2,500 sq.m green patio, open to all residents.

DATA BOX: WROCŁAW OFFICE MARKET IN 1H 2013

• In H1 2013, the transaction volume in Wrocław’s

modern office market reached nearly 51,000 sq.m,

with new leases accounting for 43% of which pre-lets

account for over 50%. It represents nearly a threefold

rise on the leasing volume recorded in the same

period of 2012. The largest deals were the Getin

Group’s lease of 11,700 sq.m in the Sky Tower office

building and Kruk’s 7,500 sq.m lease expansion in

Wrocławskie Centrum Biznesu.

• At the end of June 2013, the city’s office stock stood

at 510,000 sq.m, up by more than 40,000 sq.m

compared with the beginning of the year, largely

following the delivery of office space in the Sky Tower

(28,000 sq.m) and phase II of Skanska’s Green Towers

complex (10,800 sq.m). If all projects planned for 2013

are completed on time, this year’s supply will total

around 80,000 sq.m.

• The vacancy rate rose in Wrocław by nearly 4.4

percentage points to 12.4% from the rate of December

2012. Headline rents stood at EUR 13–16/sq.m/month,

with effective rents at EUR 11–14/sq.m/month.

Source: Cushman & Wakefield

Wings Properties belongs to Star Group Poland, a property company with more than 10 years of experi-ence on the Polish market and offices in Wrocław and Kraków. Its past projects include The Granary LaSuite Hotel and Angel Wings residential complex in Wrocław, as well as Kraków's Angel Wawel, Angel Plaza and Angel City hotels.


Vantage Development Vantage Development Vantage Development Vantage Development building new office building new office building new office building new office project in Wrocławproject in Wrocławproject in Wrocławproject in Wrocław The Warsaw-listed Vantage Development, a prop-erty unit of Poland's services giant Impel, is working on its third office project in Wrocław. With a planned GLA of 22,110 sq.m and an estimated capex of PLN 130m, the new Promenady ZITA project is to reach completion by the end of 2016. The leading leasing agent for Promenady ZITA is Savills. Vantage broke ground on the 5,660 sq.m phase one of ZITA back in August 2013, aiming to finalize the build-ing by the end of 2014. The following two phases (6,340 sq.m and 10,200 sq.m) are to be completed dur-ing the subsequent two years. A few weeks ago the de-veloper secured a EUR 23.73m loan from BRE Bank Hipoteczny (recently renamed to mBank Hipoteczny) that provides financing for the entire investment. ZITA was designed by a Wrocław-based design studio Maćków in accordance with the requirements of LEED Gold certification, applying the best practices and new sustainable technologies. The class A office scheme is located in the centre of the city, between Trzebnicka and Jedności Narodowej Streets. ZITA be-

longs to a multifunctional complex Promenady Wrocławskie, covering a 15 hectare area along the Od-ra River, only 2km from the Market Square. According to plans, Promenady Wrocławskie are to include more than 2,000 apartments and 80,000 sq.m of offices. "This office park was designed for fast-growing com-panies that plan further expansion in Wroclaw, as well as new companies that want to enter one of the most dynamically developing regional market in Poland”, says Henryk Wojciechowski, Development and Com-mercialization Director at Vantage Development. "The functional architectural design of the building with a green patio and small architecture, inscribed in-to a coherent concept of Promenady Wrocławskie, is certainly the biggest asset of this project," says Tomasz Buras, Director, Head of Office Agency at Savills.

Promenady ZITA will house more than 22,000 sq,m of class-A offices. Photo: Vantage Development

Based in Wrocław, Vantage Development has been listed on the Warsaw Stock Exchange since March 2012. Their key ongoing residential projects are the Promenady Wrocławskie and Centauris schemes with a planned floor space of 212,000 sq.m. The developer has so far completed two office buildings: Delta 44 (2,700 sq.m of offices + 1,000 sq.m retail) and


Promenady Epsilon (6,670 sq.m), the latter being the first office segment of Promenady Wrocławskie. Their future plans include a 13,700 sq.m GLA office & con-ference building Gamma Office, which will be located in one of Wrocław's fastest-growing business districts, on Fabryczna Street, as well as a retail projects in Zielona Góra (4,000 sq.m) and Wrocław (7,000 sq.m). In the first three quarters of 2013 Vantage Develop-ment had consolidated sales revenues of PLN 9.6m (against PLN 9.45m in Q1-Q3 2012) and posted net earnings of more than PLN 3m (down from PLN 4m in the prior year's period) . The company sold 130 apart-ments in January-September 2013, against only 62 in the corresponding period of 2012. Its assets were worth close to PLN 480m as of end of September 2013.

Poland Today talks to: Henryk Wojciechowski, Business Development & Leasing Di-rector at Vantage Development • PT: At what stage is Promenady ZITA at the mo-ment? Henryk Wojciechowski: We have completed the un-derground parking lot and we are currently finalizing the ground floor. We are in advanced talks with a number of prospective tenants. • PT: You've chosen to break ground on phase one be-fore securing any tenants. What about the subse-quent stages? Are you building speculative? HW: We are working on the 5,600 sq.m phase one of Promenady ZITA, which will be completed by the end of 2014. The remaining buildings will be added in line with demand. Our priority is to have a few thousand sq.m of office space that can be delivered within a few months available at any moment. A project attracts in-terest from potential tenants only when it's under con-struction – that's the way the market works.

• PT: The office vacancy levels in Wrocłąw are rela-tively high, at 12.4% in mid-2013 according to Cush-man & Wakefield... HW: The number of queries we receive signals that the Wrocław market remains attractive to both ten-ants and developers. Over the past two years the annu-al take-up has remained at 70-80,000 sq.m. We are op-timistic. Moreover, the recent completion of the resi-dential part of Promenady Wrocłąwskie as well as im-proved road access have additionally boosted custom-er interest in the project. • PT: What sets Promenady ZITA from other pro-jects? HW: Besides its obvious assets, such as a good location close to the city centre, access via public transporta-tion and architecture, what really makes the project attractive is that it constitutes part of Promenady Wrocławskie – a well thought-through scheme with modern infrastructure and emerging public spaces, a living, brand new district in the heart of Wrocław. I believe that for many strategic tenants the strongest point of Promenady ZITA and the entire office com-plex are the potentially unlimited expansion possibili-ties it offers. In a timeframe of 6 to 18 months we are able to deliver virtually any additional space a tenant may require, of course within rational limits. • PT: Promenady Wrocłąwskie are to house some 90,000 sq,m of offices, which means some 50,000 sq.m remains to be developed. What is the status of those other projects in terms of land ownership, de-signs and permits? HW: Promenady Wrocłąwskie is a unique project which due to its size and market situation has to be developed in stages. We have rights to the entire pro-ject area of and architects are currently working on successive phases of the development, within a framework created by the Guy Perry-led INVI design studio, which was selected in an international archi-tectural competition. We need to adjust our ideas to

customer preferences, market trends, and competition and therefore having the entire project designed in de-tail from the start would not make sense. • PT: What are your plans for the completed build-ings? Will they be put up for sale?

HW: As a developer, our goal is to acquire and prepare attractive sites, build and lease properties and sell them. We are not going to create an asset portfolio but rather seek new owners for our projects.


Forwarder PForwarder PForwarder PForwarder PEKAES EKAES EKAES EKAES expands intermodal expands intermodal expands intermodal expands intermodal capabilitiescapabilitiescapabilitiescapabilities withwithwithwith two two two two major major major major acquisitionsacquisitionsacquisitionsacquisitions

With two strategic acquisitions completed at the end of last year, Polish logistics operator PEKAES has sig-nificantly boosted its intermodal capabilities, seeking to take full advantage of Poland's unique location at the crossroads of Europe. "In 2013 we adopted a new strategy that makes inter-modal services key to our growth. Towards the end of the year PEKAES successfully closed two takeovers that enabled us to enter this attractive, high margin market. We acquired Spedcont, in which we had owned a minority stake, as well as Chemikals, a rail freight operator with transshipment facilities on Po-land's eastern border. We are now going to focus on taking full advantage of our combined assets and ex-ploring all synergies," PEKAES' CEO Maciej Bachman tells Poland Today.


PEKAES acquired the 53% stake in road and rail freight operator Spedcont from the Port of Gdynia Au-thority for PLN 14m, becoming the sole owner of the company that offers container and intermodal ship-ping. Spedcont specializes in rail and road shipping of 20ft and 40ft containers, truck trailers and other in-termodal units. It has a network of container terminals in Warsaw, Łódź, Poznań, and Sosnowiec, a border unit in Małaszewicze as well as container agencies in the ports of Gdynia and Gdańsk. In 2012 the operator had a net profit of PLN 1.4m on PLN 32.8m revenues. Chemikals, the other business PEKAES purchased shortly before the end of last year, operates in the north east of Poland and handles rail imports of bulk commodities to the region, with a focus on fertilizers and high quality Russian coal. Located in Braniewo, on the border with the Russian enclave of Kaliningrad, it has a 6% share in Poland's total rail freight traffic with Russia, Belarus, and Ukraine. Chemikals owns and op-erates a large transshipment complex in Braniewo, where bulk products from the east are being moved from broad gauge cars to the standard European ones, as well as an LPG terminal in Kandawa. PEKAES ac-quired 100% of shares in Chemikals from its own ma-jority shareholder Kulczyk Holding, an investment company belonging to Polish billionaire Jan Kulczyk. The company paid PLN 76m for a business with annu-al turnover of PLN 36m and EBIDTA of PLN 10m. "We are open to further acquisition opportunities that would help strengthen our intermodal business," says Maciej Bachman. "We are interested in profitable companies that create additional value for our cus-tomers. We seek to mark our presence in the Czech Republic, Slovakia, and Hungary and therefore we are also looking at potential takeover targets abroad. PEKAES still has assets for sale with an estimated val-ue of PLN 60m, which we intend to utilize well."

Listed on the Warsaw Stock Exchange since 2004, PEKAES has a network of 17 distribution hubs and 15 foreign partners. Based in Błonie, just west of Warsaw, the company offers storage, shipping, and distribution services, road, air and sea freight services as well as a range of other supply chain management services. The majority owner of PEKAES is Kulczyk Holding, an in-vestment company belonging to Polish billionaire Jan Kulczyk.

"We want to make PEKAES Poland's top provider of logistics & intermodal services," CEO Maciej Bach-man tells Poland Today. Photo: PEKAES

"We are one of Poland's largest logistics and forward-ing firms with a well-developed network and client portfolio. Over the course of last year we streamlined most operational processes and introduced the most advanced customer service standards. Our decision to enter the intermodal shipments segment and our re-cent acquisitions created a new PEKAES, one that is capable of offering the most complex services to the most demanding clients, regardless of their scale and footprint," the CEO tells Poland Today. With revenues of PLN 397m in the first three quarters of 2013 PEKAES earned PLN 7.9m after tax. Last year

the company saw its turnover drop 16%, down to PLN 523m, mainly as a result of large-scale reorganization that included sale of non-core assets. Although the company posted a consolidated net loss of PLN 13.4m during that period, it had a PLN 3.8m net profit on continued operations. "Our goal is to become the leading logistics & inter-modal operator in Poland, and a significant player in the CEE region. We are betting on organic growth and acquisitions, and keep on expanding our network of foreign partners. PEKAES is strengthening is compe-tences in Poland and investing in a better access to the lucrative markets across Poland's eastern border. Po-land is a large country with a phenomenal location, as far as logistics is concerned, and our ambition is to take advantage of that."


Italy's Finmeccanica Italy's Finmeccanica Italy's Finmeccanica Italy's Finmeccanica wins EUR 280m jet wins EUR 280m jet wins EUR 280m jet wins EUR 280m jet trainer tendertrainer tendertrainer tendertrainer tender

Poland selected the Alenia Aermacchi M-346 jet trainer for its pilot training requirement, with a EUR 280m deal for eight aircraft scheduled to be signed in early 2014, the firm said at the end of December. The information was confirmed by Poland's defense minis-try officials who emphasized, however, that the deci-sion will be confirmed following a detailed assessment of the aircraft. The contract is a yet another big achievement in Po-land for Alenia's owner Finmeccanica. Its subsidiary AgustaWestland owns Poland's top helicopter mak-er, while its defense systems unit Oto Melara sup-


plies 30mm Hitfist turrets to the highly successful Pa-tria AMVs armored vehicles made in Poland. The Ministry had earlier said that with a price tag of PLN 1.168bn Italian plane was much cheaper than ri-val offers. Alenia Aermacchi beat competition from the BAE Systems Hawk (priced at PLN 1.754bn) and KAI T-50 from Lockheed Martin and Korea Aero-space Industries (PLN 1.803bn). Poland had ear-marked PLN 1.2bn for the purchase, which covers a ground-based training system including flight simula-tors. The deal also includes training, technical and lo-gistical support. The Polish ministry of defense has al-so taken an option for a further four aircraft. The de-liveries are to take place in 2016-2017.

Poland will purchase eight M-346 jet trainers from Alenia Aermacchi. Photo: Alenia Aermacchi..

The win marks another victory for the M-346 over the T-50 after the Italian aircraft beat out the South Kore-

an-built trainer in competitions in Singapore and Isra-el. Italy has also ordered the M-346, bringing total or-ders to 48. The two aircraft are expected to compete again in the US T-X trainer competition. Poland first attempted to pick a supplier of 16 jet trainers back in 2010 but the tender was cancelled in the following year. The current procedure began in February last year, an initially attracted four bidders, including also Czech Aero Vodochody, which pulled out at an earlier stage. Technical negotiations with the remaining three bidders took place in Sep-tember and October. December proved to be a positive month for Finmeccanica. Shortly before Christmas its helicopter unit AgustaWestland was awarded a EUR 1.15bn con-tract by Norway to supply 16 AW101 search-and-rescue helicopters, with deliveries due to start in 2017. Finmeccanica is Italy's main industrial group, leader in the high technology field, and ranks among the top ten groups at world level in the aerospace, defense and se-curity sectors. Listed on the Milan Stock Exchnge, with revenues of approximately EUR 17bn, over 68,000 employees, 150 operating and commercial loca-tions and 345 production facilities in 50 different countries world-wide, Finmeccanica is an internation-al a group with an important presence in its four do-mestic markets: Italy, United Kingdom, the United States and Poland. The company's main Polish business is the country's top helicopter maker PZL Świdnik, which belongs to AgustaWestland. The company is one of several global giants hoping to grab the PLN 8bn order for 70 heli-copters from the Polish military. Its competitors in-clude Europe's Airbus Group (formerly known as EADS), which seeks to triple its Polish workforce over the coming years to reach the 3,000 mark, and US Si-korsky Aircraft, which produces the S70i Black

Hawk helicopter in Mielec. All three aerospace and defense giants are promising huge investments in Po-land, should their offer get chosen by the Polish army. At the end of last year Airbus Group met with 200 po-tential subcontractors in Poland to discuss future co-operation.


German ferry operator German ferry operator German ferry operator German ferry operator opopopopens new Trelleborgens new Trelleborgens new Trelleborgens new Trelleborg----Świnoujście serviceŚwinoujście serviceŚwinoujście serviceŚwinoujście service The German ferry company TT-Line that connects Sweden's Trelleborg and Germany's Travemünde, has opened another ferry route across the Baltic. Since the beginning of January, TT-Line has been providing freight and passenger service on between Trelleborg and the western Polish port of Świnoujście. Due to Trelleborg's location, the new connection will also provide convenient access to and from the major Nordic urban centers of Malmö and Copenhagen. TT-Line's MS Nils Dacke ferry travels between Trelleborg and Świnoujście ports every day except Sundays, six times a week. The vessel has 163 cabins and a cargo capacity of 2,200 lane meters. TT-Line has sailed the Trelleborg-Travemünde route that gave the company its name since 1962. TT-Line is a privately owned company, owned by German ship-owners Trampschiffahrt GmbH & Co. KG (83.5%) and Aug. Bolten Wm. Millers Nachfolger GmbH & Co. KG (16.5%). TT-Line's ferries transport 630,000 passengers and 330,000 freight units on up to 16 daily departures from Trelleborg in Sweden to Travemünde and Rostock in Germany and Świnoujście in Poland.


TT-Line's MS Nils Dacke ferry will makes six cruises a week between Świnoujście in Poland and Trelleborg in Sweden. Photo: TT-Line

Polish Unity Line has operated on the Trelleborg and Swinoujscie route with two or three daily crossings since 2007. Other ferry operators connecting Poland with Scandinavia include Swedish Stena Line and Polish Polferries (PŻB), which the government hopes to privatize in the near future. Polish seaports wel-comed 2.358 passengers in 2012, 54% of which trav-elled via Świnoujście, which is particularly popular due to its connection to Ystad.

FOOD & AGRICULTURE

Nestle & General Mills Nestle & General Mills Nestle & General Mills Nestle & General Mills to to to to invest PLN 50m in invest PLN 50m in invest PLN 50m in invest PLN 50m in Toruń cereal plantToruń cereal plantToruń cereal plantToruń cereal plant Poland's top producer of breakfast cereal, the Nestle-General Mills joint venture Cereal Partners Poland Toruń-Pacific (CPP), seeks to expand its product range to include the popular Nestle Fitness brand, which is currently being imported to Poland and the CEE region from France. The new production lines are to cost estimated PLN 50m and they will be opera-tional in 2014, CPP's CEO Wojciech Sobieszak said in an interview with the Rzeczpospolita daily.

CPP turned over PLN 639.5m in 2012, a decline of 8.4% against the prior year, and in 2013 it expects a further drop, down to PLN 630m. The company ex-ports almost two thirds of its output to 36 markets. Poland Today approached CPP with questions about their recent performance as well as the new invest-ment, but the company declined to provide any further details.

Breakfast cereal & muesli sales in PLNm

700

710

720

730

740

750

2009 2010 2011 2012 *2013

*) projected

Source: CPP Toruń-Pacific/ Rzeczpospolita

"The project is quite complex and it still remains at an early design stage and therefore we are unable to pro-vide any specifics at the moment," CPP's spokesperson Jarosław Szczepanowski told Poland Today. The estimated sales of breakfast cereal in Poland total some PLN 750m, a half of which goes to CPP Toruń-Pacific. However, in volume terms, private labels rep-resent nearly 45% of the market, with CPP's share topping some 37%. The undisputed leader is Poland's number one retail chain Biedronka, which sells near-ly a third of all breakfast cereal consumed in the coun-try.

Over the past decade the demand for breakfast cereal in Poland has increased by 40%, and now stands at ap-proximately 50,000 tons per annum, which translates into a per capita consumption of 1.3kg. Back in 1990 the figure stood at 0.025kg, so the progress is remark-able, but since only 45% of Polish households regularly purchase cereal, the growth potential is considerable. Despite growing consumption, the number of produc-ers has shrank from an estimated 30 in early 1990s down to less than 10 at the moment. Most companies focus on supplying private label products to retail chains. As for the Nestlé group, it has recently broken ground on its 10 th Polish factory, a Nestlé Purina PetCare fa-cility in Nowa Wieś Wrocławska near Wrocław. The PLN 300m project is to be operational in 2H 2014 and will create 200 jobs (see PT Business Review+ No. 001 page 12 for an interview with Giorgio Vesprini, Coun-try Manage, Nestlè Purina Poland & Baltics.) Nestlé has been present in Poland since 1993 and cur-rently operates nine plants in the country. The com-pany is known for its Nescafe coffee, Winiary ready-made foods and condiments under, Gerber baby food products, confectionery brand Princessa, mineral wa-ter brand Nalęczowianka as well as Purina pet food. Nestle currently employs an estimated 5,100 people in Poland. In 2012 Nestle Polska generated PLN 3.5bn sales revenues, up from PLN 2.7bn in 2011. Since its first entered the Polish market two decades ago Nestle has invested in excess of PLN 1.6bn in the country.


SERVICES & BPO

UK's Cineworld UK's Cineworld UK's Cineworld UK's Cineworld buys buys buys buys Cinema CiCinema CiCinema CiCinema Citytytyty to become to become to become to become Europe's No. 2 movie Europe's No. 2 movie Europe's No. 2 movie Europe's No. 2 movie theater chaintheater chaintheater chaintheater chain In an unexpected announcement, Britain's top cinema operator Cineworld said it was buying about 100 mul-tiplexes in eastern Europe and Israel in a cash and shares deal worth about GBP 500m that gives it a number one position in Poland, among other markets. The UK company will pay the Netherlands-based, Is-raeli-owned Cinema City International (CCI), GBP 272m in cash, and has launched a GBP 110m rights is-sue to help fund the purchase. As a result, CCI will be-come a 24.9% shareholder in the enlarged group.

Cinema City is Poland's number one multiplex cine-ma operator with 31 cinemas in 19 cities and a pipe-line of future openings. Photo: Cinema City

Cinema City, which trades on the Warsaw Stock Ex-change, operates 99 multiplexes with 966 screens in

seven countries across Central and Eastern Europe and Israel and owns a cinema advertising business and the Forum Film distribution companies, which dis-tribute films for international and domestic film studi-os. For full year 2012, Cinema City had total revenues of EUR 280.7m (GBP 231.6m) and EBITDA of EUR 60.2m (GBP 49.7m) and in the 2013 interim period, it had total revenues of EUR 209m (GBP 172.5m). Since its initial public offering in 2006 the company has opened 500 new screens and it currently has 36 new multiplexes (377 screens) under development. Cinema City's total number of admissions rose by 3% y/y last year. With 31 cinemas in 19 Polish cities, Cinema City is the number one operator in Poland, its key market. Last year it signed contracts for four new outlets (38 screens) in Poland, two in Warsaw (at the planned GTC shopping centers in Wilanów and Białołęka), one in Lublin (IKEA Lublin) and one in Starogard Gdański. Cineworld, which floated on the stock exchange in 2007, operates 102 sites including 10 highest grossing cinemas in the UK and Ireland, and this is its first for-ay beyond these borders. The company is the UK and Ireland’s leading cinema group in terms of box office revenues and also operates theaters under the Picturehouse brand. The tie-up with Cinema City would create the second biggest exhibition business in Europe with the No. 1 or No. 2 position by number of screens in each of the regions where it is involved. The combined company would have 201 sites and 1,852 digital screens. In full year 2012, the Cineworld Group (including Picturehouse) accounted for over 47m ad-missions, had revenues of GBP 358.7m and EBITDA before exceptional items of GBP 67.1m. According to Cineworld, the Cinema City takeover brings attractive growth opportunities in developing economies and markets in which multiplex screen penetration is comparatively low, with low admissions

per capita, high population per screen and low average ticket prices. In 2009, Cinema City had revenues of EUR 188.5m, EBITDA of EUR 35.8m and operating profit of EUR 19.6m and has since experienced strong growth with 2009-2012 revenue, EBITDA and operat-ing profit CAGR of 14.2%, 18.9%and 14.8% respective-ly. Furthermore, Cinema City has a strong pipeline of screen openings in place to capitalize on further growth, the UK-based operator said in a statement. The current CEO of CCI, Mooky Greidinger, whose family has indirect control of CII's majority share-holder I.T. International Theatres Ltd., will be ap-pointed as Chief Executive Officer of the enlarged group. "This is an exciting and unique opportunity for Cineworld to offer shareholders enhanced growth prospects and attractive returns via exposure to some of the most promising cinema markets in Europe. Cin-ema City is an extremely well-run and dynamic busi-ness, which creates a platform for further growth in future. Mooky Greidinger will be joining us as CEO - he is a highly respected and very experienced cinema executive who enjoys international recognition. The Board therefore unanimously recommends this pro-posed transaction with CCI," commented Anthony Bloom, Chairman of Cineworld, who will maintain his position in the enlarged group. In the first three quarters of 2013 Polish cinemas sold 25.8m tickets, marking a 6% decline y/y. Their box of-fice revenues dropped by 7.8%, down to PLN 515m. Poland's second largest multiplex operator Multikino was acquired by Cineworld's competitor, British Vue Entertainment last year. The number three player on the market is Helios, owned by the Warsaw-listed media group Agora.


RETAIL & SERVICES

Poland's luxury goods Poland's luxury goods Poland's luxury goods Poland's luxury goods market to hitmarket to hitmarket to hitmarket to hit PLN 13bn PLN 13bn PLN 13bn PLN 13bn in 2016, says KPMGin 2016, says KPMGin 2016, says KPMGin 2016, says KPMG Sales of luxury goods & services in Poland are to pass the PLN 12.9bn mark in 2016 according to the fourth edition of the annual KPMG report on the sector. The business consultancy argues that Poland still remains, to a large extent, uncharted territory for global luxury players, even though the number of wealthy Poles is soon about the reach 1m, and close to 70% of the world's most prestigious brands are already available in the country. Despite the prolonging euro zone crisis and recent economic slowdown in Poland, the number of well-off individuals (people with annual gross income of PLN 85,000 and above) in the country continues to rise. Last year the group expanded by some 18,000 from the 2012 level, topping 786,000 while their combined net income increased by PLN 4.1bn, reaching PLN 130.9bn. KPMG estimates that before the end of 2016 there will be 1m wealthy and rich Poles with a total in-come of PLN 172bn in the country. Still, however, the Poles are lagging way behind west-ern Europe as far as their personal wealth is con-cerned. KPMG estimates the number of Poles with as-sets of more than USD 1m at no more than 50,000. Even in EU countries with much smaller populations, such as Portugal and Finland the figure stands at more than 60,000. "An average EU citizen has personal wealth of USD 138,600, which places Poland, with the average of merely USD 20,800 at number 24 in the entire 27-

nation bloc. Only the average Lithuanian, Latvian, Romanian, and Bulgarian is poorer that a statistical Pole," says Andrzej Marczak, Partner at KMPG Po-land. "At the current annual growth rate of 4.1% it will take Poland 50 years to catch up with the EU average."

No. of wealthy Poles in '000

500

600

700

800

900

1,000

2008 2009 2010 2011 2012 2013 *2014 *2015 *2016

Note: KPMG defines people with annual gross income of PLN 85,000

and more as "wealthy" *) projected

Source: KPMG

The Polish market for luxury goods & services, which amounted to an estimated PLN 10.8bn last year (up from PLN 10.2bn in 2012), is trying to keep up with the Kowalskis. KPMG experts see the sector's 2016 turno-ver at PLN 12.9bn, more than 19% above the last year's level (PLN 10.8bn). Some 69% of all global luxury brands are already available in Poland, and the market is gradually becoming saturated. A survey conducted by KPMG showed that most luxury goods retailers op-erating in Poland are pleased with the current situa-tion and optimistic about the future. With an estimated sales of PLN 4.5bn, luxury cars rep-resent more than 40% of the entire segment and un-like the motor vehicle sector as whole, they seem re-sistant to economic cycles. Well-off Poles are also keen on luxury clothing and accessories (PLN 1.8bn), hotel

and wellness services (PLN 1.2bn), upscale real estate (PLN900m), spirits and cigars (PLN 714m) as well as furniture (PLN 580m). The two segments to experi-ence the most notable growth over the next three years, according to KPMG, will be luxury properties (+29%) and hotels & spas (+28%).

Poland's luxury goods & services market

in PLNbn

0

2

4

6

8

10

12

14

2007 2008 2009 2010 2011 2012 2013 *2014 *2015 *2016

*) projected

Source: KPMG

Despite their overall positive outlook, three out of four companies surveyed by the consultancy identified a number of factors that constrain their expansion in Poland. They include a relatively small target group, currency fluctuations, administrative and legal con-straints as well as elevated rents. "For many companies that sell luxury consumer goods, such as clothing, accessories, or jewelry, the lack of a proper high street, particularly in Warsaw, is a major hindrance. The recent opening of the vitkAc depart-ment store was a step in the right direction. Perhaps the planned revamping of the Plac Trzech Krzyży area will lead to the creation of a luxury shopping district in the Polish capital in the coming years," says Andrzej Marczak.


POLITICS & ECONOMY

PoliPoliPoliPolish politician csh politician csh politician csh politician callallallalls s s s forforforfor Tesco boycott amid Tesco boycott amid Tesco boycott amid Tesco boycott amid migration rowmigration rowmigration rowmigration row with UKwith UKwith UKwith UK Comment made by Jan Bury, head of the parliamen-tary faction of the Polish Peasants Party (PSL), the junior member of Poland's ruling coalition, have gained quite lot of attention in the global media last week. Mr. Bury urged the Poles to boycott Tesco stores in retaliation for British Prime Minister David Cameron's remarks about Polish migrants pocketing British welfare payments. Cameron has said he wants new EU rules to limit ac-cess for migrants to their host countries' welfare pay-ments and pointed to Poles, among the biggest migrant communities in Britain, as an example of the potential abuse of rules. Mr. Bury referred to Cameron's policies as "unfriendly and scandalous towards Poland and Poles," as quoted by the Polish Press Agency PAP. "As Poles, we can also say 'no' to Prime Minister Cam-eron and his policies," Bury, a former deputy treasury minister, said. "We call on Poles to boycott British re-tailer Tesco." Ahead of 2015 elections, Conservative Party leader Cameron is under pressure to address voter concerns about immigration, an issue that flared up again this month after restrictions expired on Romanians and Bulgarians working in Britain. His comments in a tele-vised interview that he wanted to stop migrants from the country sending home child benefit provoked a fu-rious reaction in Poland, with top government and op-position politicians condemning Cameron for his al-leged anti-Polish rhetoric. Polish PM Donald Tusk

said it was unacceptable to deny benefits to any EU citizen on the grounds of nationality. As the diplomatic row unfolded, Cameron telephoned his Polish counterpart in an attempt to build bridges and assure Donald Tusk he was not singling out Poles for criticism and that the impact of labor flows on the benefits systems of member states was a "pan-EU is-sue". Downing Street said both Cameron and Tusk had agreed to "hold further bilateral discussions on how the UK and Poland can work together to better man-age the impact of intra-EU migration on social security systems." Polish government officials said Cameron had assured Tusk that he did not intend to "stigmatize" Poles. However, the UK Prime Minister's spokesman had earlier explained that it was "perfectly fair" for Cameron to mention Poles since they had moved to Britain in larger numbers than nationals from other new EU member states when they joined the bloc in 2004. As for Tesco, which employs 30,000 people in Poland and sells merchandise supplied by 1,500 Polish com-panies, it does not seem likely that the calls for a boy-cott would have any noticeable impact on its business in Poland, which has suffered some setbacks in recent years due to changing customer habits and aggressive expansion of discount grocery chains. The British re-tailer, which entered the Polish market nearly two decades ago, said that it dealt in "retail, not politics." With annual revenues of PLN 10.8bn, Tesco is one of Poland's top five retail chains. The number one spot belongs to the Portuguese-owned Jeronimo Martins Polska, owner of the Biedronka chain, which ranks as Poland's 4th largest company by revenues with a turnover of PLN 28.9bn. Other leading foreign-owned players in the sector include Germany's Metro AG (via its Makro Cash & Carry unit as well as electron-ics chains Saturn & Media Markt) and Lidl, as well as

France's Carrefour and Auchan (the latter has re-cently taken over Metro's hypermarket chain Real).

POLITICS & ECONOMY

Poland to join world's Poland to join world's Poland to join world's Poland to join world's top 20 richest nations top 20 richest nations top 20 richest nations top 20 richest nations by 2022by 2022by 2022by 2022, PM says, PM says, PM says, PM says

Poland is to join the world's 20 wealthiest nations by 2022 thanks to funds from the 2014-2020 EU budget pool, Polish Prime Minister Donald Tusk told a news conference last week. "According to our assumptions in 2022 Poland will certainly be among the 20 richest countries in the world," Tusk said. "At the time we should reach 80% of EU average in terms of GDP per capita thanks to funds from the 2014-2020 EU budget pool”, PM Tusk said, adding that the spending will be targeted to re-duce poverty and help underdeveloped areas. "We assume that by 2020, 1.5m Poles will exit pov-erty," the PM said. "In 2020, the level of poverty in Po-land will be lower than the EU average." The focus will shift to reducing imbalances within re-gions rather than between regions, Tusk said. To that end, Poland will allocate PLN 8bn to mid-sized towns, mostly to former capitals of provinces which lost the status due to the administrative reform conducted in late 1990s. In other areas, Poland wants to reach EU average spending on R&D in 2022, i.e. 2% of GDP. According to the PM, half of the funding would come from budg-et, and the other half - from businesses.

weekly newsletter # 018 / 13 January 2014 / page 15

KEY STATISTICS

Consumer PriceConsumer PriceConsumer PriceConsumer Pricessss

Data in (%) Aug '13 Sep '13 Oct '13 Nov '13

Sector y/y m/m y/y m/m y/y m/m y/y m/m

Food & bev 2.5 -1.2 +2.6 0.0 +1.9 -0.1 +1.9 +0.3

Alcohol, tobacco +3.6 +0.2 +3.7 +0.2 +3.6 +0.1 +3.6 +0.1

Clothing, shoes -4.8 -2.7 -4.7 +0.7 -4.8 +3.5 -4.9 -0.2

Housing +2.0 +0.1 +1.8 +0.1 +1.8 +0.2 +1.8 +0.1

Transport -1.4 +0.5 -1.4 +0.8 -2.3 -1.0 -2.3 -1.2

Communications -9.7 0.0 -9.7 0.0 -7.2 +2.8 -11.7 -4.9

Gross CPI +1.1 -0.3 +1.0 +0.1 +0.8 +0.2 +0.6 -0.2

IIIInflationnflationnflationnflation

-1%

0%

1%

2%

3%

4%

5%

Nov 11

Jan 12

Mar 12

May 12

Jul 12

Sep 12

Nov 12

Jan 13

Mar 13

May 13

Jul 13

Sep 13

Nov 13

y/y m/m

Retail Retail Retail Retail TurnoverTurnoverTurnoverTurnover

Month Jul '13 Aug '13 Sep '13 Oct '13 Nov '13

m/m (%) +3.8 -0.7 -0.9 +3.6 -5.8

y/y (%) +4.3 +3.4 +3.9 +3.2 +3.8

Year 2008 2009 2010 2011 2012

Turnover in PLNbn 564.7 582.8 593.0 646.1 676.0

y/y (%) +13.3 +4.3 +5.5 +11.6 +5.6

Residential ConstructionResidential ConstructionResidential ConstructionResidential Construction

Dwellings

(in '000 units)

2008 2009 2010 2011 2012 Jan-Nov

2013

y/y

(%)

Permits 230.1 178.8 174.9 184.1 165.1 126.3 -17.6

Commenced 174.7 142.9 158.1 162.2 141.8 121.0 -11.2

U. construction 687.4 670.3 692.7 723.0 713.1 704.1 -2.8

Completed 165.2 160.0 135.7 131.7 152.5 129.6 -4.6

Source: Central Statistical Office (GUS)

GGGGross Domestic Productross Domestic Productross Domestic Productross Domestic Product

Period Growth y/y unadjusted

GDP in PLN bn current prices

Current account def. in % of GDP

Q3 2013 +1.9% 404,310 -2.0%

Q2 2013 +0.8% 395,657 -2.3%

Q1 2013 +0.5% 377,815 -3.1%

Q4 2012 +0.7% 442,231 -3.5%

2012 +1.9% 1,522,736 -3.5%

2011 +4.5% 1,462,734 -4.9%

2010 +3.9% 1,416,585 -5.1%

2009 +1.6% 1,344,384 -3.9%

Key Economic Data & ProjectionsKey Economic Data & ProjectionsKey Economic Data & ProjectionsKey Economic Data & Projections

Indicator *2010 *2011 *2012 2013 2014

GDP change +3.9% +4.5% +1.9% +1.5% +3.1%

Consumer inflation +2.6% +4.3% +3.7% +0.9% +1.5%

Producer inflation +2.1% +7.6% +3.4% -1.2% +0.7%

CA balance, % of GDP -5.1% -5.0% -3.7% -1.4% -0.3%

Nominal gross wage +3.9% +5.2% +3.7% +3.2% +4.4%

Unemployment** 12.4% 12.5% 13.4% 13.5% 12.7%

EUR/PLN 3.99 4.12 4.19 4.20 4.06

Sources: NBP, BZ WBK, GUS *) actual figures **) year-end

GrGrGrGross Wagesoss Wagesoss Wagesoss Wages A: avg monthly wages in PLN B: indexed avg wages, 100=2005

Sector Q4 2012 Q1 2013 Q2 2013 Q3 2013

A B A B A B A B

Coal mining 8,427 192 6,060 138 6,290 143 6,061 138

Manufacturing 3,522 154 3,491 152 3,560 155 3,625 158

Energy 6,535 198 6,196 188 5,828 177 6,021 183

Construction 3,829 163 3,556 152 3,693 157 3,766 160

Retail & repairs 3,365 143 3,432 146 3,421 146 3,408 145

Transportation 3,816 135 3,439 122 3,547 125 3,589 127

IT, telecoms 6,379 166 6,685 174 6,707 174 6,654 173

Financial sector 6,044 136 6,356 143 6,702 151 6,109 137

National average 3,878 154 3,741 149 3,613 144 3,652 145

Source: Central Statistical Office (GUS)

Construction OutputConstruction OutputConstruction OutputConstruction Output

Month May '13 Jun '13 Jul '13 Aug '13 Sep '13 Oct '13 Nov '13

m/m (%) +16.1 +19.1 +7.8 -0.8 +9.4 +14.3 -2.9

y/y (%) -27.5 -18.3 -5.2 -11.1 -4.8 -3.2 -8.9

Year 2006 2007 2008 2009 2010 2011 2012

y/y (%) +18.1 +15.5 +12.1 +5.1 +4.6 +11.8 -0.6

Source: The Central Statistical Office of Poland, GUS

Sentiment IndicatorsSentiment IndicatorsSentiment IndicatorsSentiment Indicators

Economic sentiment and consumer confidence indicators

-40

-20

0

20

Mar

11

Jun 11

Sep 1

1

Dec 11

Mar 12

Jun 12

Sep 12

Dec 12

Mar

13

Jun 13

Sep 13

Dec 13

60

80

100

120 Co nsumer confidence (left axis)

Economic sentiment (right axis)

The economic sentiment (1990-2010 average = 100) is a composite made up of 5 sectoral confidence indicators, which are arithmetic means of seasonally adjusted balances of answers to a selection of questions closely related to the reference variable. Source: Eurostat

Producer PriceProducer PriceProducer PriceProducer Pricessss

Month May'13 Jun '13 Jul'13 Aug'13 Sep'13 Oct'13 Nov'13

m/m (%) +0.1 +0.7 +0.2 -0.3 +0.1 -0.7 -0.3

y/y (%) -2.5 -1.3 -0.8 -1.1 -1.4 -1.4 -1.5

Year 2006 2007 2008 2009 2010 2011 2012

y/y (%) +2.0 +2.0 +2.2 +3.4 +2.1 +7.6 +3.3

Construction PriceConstruction PriceConstruction PriceConstruction Pricessss

Month May'13 Jun '13 Jul'13 Aug'13 Sep'13 Oct'13 Nov'13

m/m (%) -0.2 -0.1 -0.1 -0.2 -0.1 -0.1 -0.2

y/y (%) -2.0 -2.0 -1.9 -1.9 -1.8 -1.8 -1.8

Year 2006 2007 2008 2009 2010 2011 2012

y/y (%) +3.2 +7.4 +4.8 +0.2 -0.1 +1.0 +0.2

Industrial OuIndustrial OuIndustrial OuIndustrial Outputtputtputtput

Month May '13 Jun '13 Jul '13 Aug '13 Sep '13 Oct '13 Nov '13

m/m (%) -0.7 +2.6 +1.5 -4.5 +9.6 +6.0 -6.2

y/y (%) -1.8 +2.8 +6.3 +2.2 +6.2 +4.4 +2.9

Year 2006 2007 2008 2009 2010 2011 2012

y/y (%) +11.6 +10.7 +3.6 -3.5 +9.8 +7.7 +1.0


TTTTraderaderaderade

Poland exports and imports according to commodity groups, according to SITC classification

EXPORTS in PLN bn IMPORTS in PLN bn

Jan-Oct

2013 y/y (%)

share (%)

2012 share (%)

Jan-Oct 2013

y/y (%)

share (%)

2012 share (%)

Food and live animals 56,746 +9.4 10.7 61,694 10.3 38,800 +4.3 7.2 44,287 6.9

Beverages and tobacco 7,170 +6.0 1.4 7,967 1.3 3,338 +1.0 0.6 3,989 0.6

Crude materials except fuels 13,343 +10.5 2.5 14,024 2.4 18,009 -6.4 3.4 22,053 3.5

Fuels etc 24,776 +0.6 4.7 29,389 4.9 63,364 -10.0 11.8 85,280 13.4

Animal and vegetable oils 1,484 +36.0 0.3 1,342 0.2 2,213 -9.0 0.4 2,887 0.5

Chemical products 49,367 +6.8 9.3 54,295 9.1 78,196 +2.5 14.6 89,140 14.0

Manufactured goods by material 109,878 +1.3 20.6 126,161 21.1 94,121 -2.1 17.5 110,773 17.4

Machinery, transport equip. 200,458 +5.4 37.6 223,646 37.5 177,909 +3.1 33.1 203,718 31.9

Other manufactured articles 68,214 +5.9 12.8 75,925 12.7 48,271 -3.4 9.0 57,646 9.0

Not classified 1,380 n/a 0.1 2,653 0.5 13,347 n/a 2.4 18,515 2.8

TOTAL 532,816 +4.9 100 597,096 100 537,568 -0.9 100 638,288 100

Poland's ten largest trading partners, ranked according to 2012

EXPORTS in PLNbn IMPORTS in PLN bn

No Country Jan- Oct 2013

share *2012 Share No Country Jan- Oct 2013

share *2012 Share

1 Germany 133,127 25.0% 150,046 25.1% 1 Germany 115,531 21.5% 134,933 21.1%

2 UK 34,789 6.5% 40,184 6.7% 2 Russia 66,670 12.4% 91,033 14.3%

3 Czech Rep. 32,706 6.1% 37,475 6.3% 3 China 50,619 9.4% 57,235 9.0%

4 France 30,127 5.7% 34,862 5.8% 4 Italy 27,799 5.2% 32,782 5.1%

5 Russia 28,841 5.4% 32,290 5.4% 5 France 20,573 3.8% 25,303 4.0%

6 Italy 22,997 4.3% 29,067 4.9% 6 Netherlands 20,271 3.8% 24,543 3.8%

7 Netherlands 20,950 3.9% 26,678 4.5% 7 Czech Rep. 19,660 3.7% 23,327 3.7%

8 Ukraine 15,017 2.8% 17,213 2.9% 8 USA 14,579 2.7% 16,436 2.6%

9 Sweden 14,666 2.7% 15,811 2.6% 9 UK 14,208 2.6% 15,509 2.4%

10 Slovakia 13,939 2.6% 15,288 2.6% 10 South Korea n/a n/a 14,619 2.3%

Source: Central Statistical Office (GUS) *) preliminary estimates, full year

CurrencyCurrencyCurrencyCurrency

Central Bank average rates

as of 10 January 2014

100 USD 307.00 ↑

100 EUR 417.45 ↑

100 GBP 503.89 ↑

100 CHF 338.18 ↓

100 DKK 55.95 ↑

100 SEK 47.01 ↑

100 NOK 49.65 ↑

10,000 JPY 292.48 ↓

100 CZK 15.25 ↑

10,000 HUF 139.34 ↓

100 USD/EUR against PLN

300

350

400

450

24 Jan 13

3 A

pr 13

13 Jun 13

21 Aug 13

28 O

ct 13

10 Jan 14

USD EUR

MMMMoney Supplyoney Supplyoney Supplyoney Supply

in PLN m Aug '13 Sep '13 Oct '13 Nov '13

Monetary base 153,867 166,620 154,967 153,672

M1 531,124 540,873 536,237 538,837

- Currency outside banks 114,083 113,223 113,174 113,718

M2 928,359 931,042 935,095 934,713

- Time deposits 412,407 405,703 414,941 412,469

M3 949,988 947,228 955,419 953,446

- Net foreign assets 154,035 147,978 150,517 148,702 Monetary base: Polish currency emitted by the central bank and money on accounts held with it. M1= currency outside banks + demand deposits M2= M1+ time deposits (inc in foreign currencies) M3= the broad measure of money supply Source: NBP

CCCCreditreditreditredit

The financial sector's net lending in PLN bn,

loan stock at the end of period

Type of loan Jul '13 Aug '13 Sep '13 Nov '13

Loans to customers 901,863 908,106 901,288 906,298

- to private companies 263,491 262,963 559,965 262,396

- to households 556,027 560,608 260,585 563,157

Total assets of banks 1,627,182 1,626,489 1,612,836 1,627,119

Source: Central Bank NBP

IIIInterest ratesnterest ratesnterest ratesnterest rates

Average weighted annual interest rates

on loans to non-financial corporations

Term / currency Jun '13 Jul '13 Aug '13 Sep '13 Oct '13 Nov '13

PLN (up to 1 year) 5.0% 4.7% 4.6% 4.5% 4.5% 4.5%

PLN (up to 5 y ) 5.4% 5.1% 5.1% 4.9% 4.9% 4.9%

PLN (over 5 y) 5.3% 4.9% 4.9% 4.8% 4.8% 4.8%

PLN (total) 5.3% 5.0% 4.9% 4.8% 4.8% 4.8%

EUR (up to 1m EUR) 1.9% 2.3% 1.9% 1.8% 2.0% 1.9%

EUR (over 1m EUR) 2.9% 3.5% 3.5% 3.2% 2.5% 3.0%

Warsaw Inter Bank Offered Rate (WIBOR) as of 10 Jan 2014

Overnight 1 week 1 month 3 months 6 months

2.59%% 2.58% 2.61% 2.70% 2.72%

Central Bank (NBP) Base Rates

Reference Lombard NBP deposit Rediscount

2.50% 4.00% 1.00% 2.75%

Stock ExchangeStock ExchangeStock ExchangeStock Exchange

Warsaw Stock Exchange, rates in PLN

WIG-20 stocks in alphabetical

order

Price 10 Jan

'14

Change 3 Jan

'14

Change end of

'12

↓ Asseco Pol. 45.5 -5% 0%

↓ Bogdanka 122 -5% -10%

↓ BZ WBK 373 -2% 54%

↓ Eurocash 45.24 -8% +4%

↓ Grupa Lotos 34.5 -4% -16%

↓ GTC 7.23 -2% -27%

↓ Handlowy 98.05 -5% 0%

↓ JSW 49.4 -9% -47%

↑ Kernel 42 +2% -37%

↓ KGHM 111.6 -6% -41%

↓ mBank 479.95 -2% 47%

↓ Orange Pol. 9.78 -1% -20%

↓ Pekao 177 -1% +6%

↓ PGE 15.74 -3% -14%

↓ PGNiG 4.85 -6% -7%

↓ PKN Orlen 42.2 -1% -15%

↓ PKO BP 38.31 -2% +4%

↓ PZU 426 -5% -3%

↓ Synthos 5.20 -9% -4%

↓ Tauron 4.19 -4% -12%

Source: Warsaw Stock Exchange

Key indices

as of 10 January 2014

WIG Total index

49494949,,,,796796796796....50505050 Change 1 week 0% →

Change end of '12 +9% ↑

WIG-20 blue chip index

2,2,2,2,327.89327.89327.89327.89 Change 1 week 0% →

Change end of '12 -7% ↓

WIG Total closing index

last three months

48,000

50,000

52,000

54,000

56,000

2 O

ct 13

24 O

ct 13

19 N

ov 13

11 D

ec 13

10 Jan 14


Poland Today Sp. z o. o.

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today.pl

Publisher Richard Stephens

Financial Director Arkadiusz Jamski

Creative Director Bartosz Stefaniak

New Business Consultant

Tomasz Andryszczyk

RRRRegional Dataegional Dataegional Dataegional Data

Poland's regions

(main cities indicated

in brackets)

Industrial output

Jan-Nov 2013 *

Monthly wages (PLN)

Jan-Nov 2013 **

Unemploy-ment

Nov 2013

New dwellings Jan-Nov 2013

Indus-

try

Constru-

ction

Indus-

try

Constru-

ction

in '000 % Num-

ber

Index *

Dolnośląskie (Wrocław) 99.9 94.7 4,237 4,031 150.9 13.0 15,174 113.2

Kujawsko-Pomorskie (Bydgoszcz) 102.4 105.9 3,337 3,297 146.7 17.8 5,808 105.1

Lubelskie (Lublin) 102.6 96.3 3,673 3,031 129.9 14.0 5,636 89.7

Lubuskie (Zielona Góra) 96.6 91.0 3,373 2,983 58.2 15.3 3,026 104.7

Łódzkie (Łódź) 104.1 90.8 3,667 3,061 149.8 13.9 5,644 79.0

Małopolskie (Kraków) 97.2 90.8 3,749 3,361 161.5 11.4 13,544 101.9

Mazowieckie (Warszawa) 106.8 78.6 4,466 4,785 280.9 11.0 25,962 93.1

Opolskie (Opole) 97.9 94.9 3,487 3,199 50.5 14.0 1,558 101.2

Podkarpackie (Rzeszów) 108.7 97.4 3,257 3,088 149.7 16.0 5,329 95.8

Podlaskie (Białystok) 105.8 97.0 3,179 3,767 69.5 14.9 3,592 87.8

Pomorskie (Gdańsk-Gdynia) 102.8 94.7 3,875 3,494 112.0 13.1 11,037 90.0

Śląskie (Katowice) 97.7 90.7 4,516 3,552 206.7 11.1 9,540 108.2

Świętokrzyskie (Kielce) 101.5 88.5 3,378 3,191 87.9 16.1 2,385 87.1

Warmińsko-Mazurskie (Olsztyn) 98.8 84.0 3,171 3,074 112.2 21.1 4,020 86.3

Wielkopolskie (Poznań) 104.8 91.1 3,669 3,624 142.5 9.5 12,345 93.7

Zachodniopomorskie (Szczecin) 112.1 86.7 3,417 3,274 107.1 17.4 4,988 76.4

National average 101.8 88.0 3,906 3,707 2,116.0 13.2 129,588 113.2

Index 100 = same period of the previous year. ** without social taxes

Sources: Central Statistical Office GUS, NBP, C&W

Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)Foreign Direct Investment (EUR m)

Quarter Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13

in Poland 1,861 1,381 2,886 175 -3,020 -1,794

Polish DI 310 -550 -1,203 957 2,588 -1,529

Year 2007 2008 2009 2010 2011 2012

in Poland 17,242 10,128 9,343 10,507 14,832 4,716

Polish DI -4,020 -3,072 -3,335 5,484 -5,276 375

Current Account (EUR m)Current Account (EUR m)Current Account (EUR m)Current Account (EUR m)

Period 2010 2011 2012 Q1 '13 Q2 '13 Q3 '13

Trade balance -8,893 -10,059 -5,313 -139 1,203 1,017

Services, net 2,334 4,048 4,816 1,274 1,686 1,047

CA balance -18,129 -17,977 -13,332 -2,313 486 -2,027

CA balance vs GDP -5.1% -5.0% -3.7% -3.1% -2.3% -2.0%

Source: NBP, BZ WBK

UUUUnemploymentnemploymentnemploymentnemployment

Registered unemployed, in ‘000 and

% of population in working age

1800

2000

2200

2400

2600

Q3 10

Q1 11

Q3 11

Q1 12

Q3 12

Q1 13

Q3 13

6

9

12

15 number (left axis) % (right axis)

Source: Central Statistical Office GUS

IndustrIndustrIndustrIndustrial ial ial ial PropertiesPropertiesPropertiesProperties

by region, 1H 2013

Existing stock, sq.m

Under const ruction, sq.m

Va-cancy ratio

Effective rents EUR/ sq.m/mth

Warsaw central 2,728,000 41,000 15.9%

3.5–5.0

Warsaw suburbs 1.9–3.2

Central Poland 1,021,000 8,000 16.5% 1.9–3.1

Poznań 1,041,000 50,000 3.6% 2.3–2.9

Upper Silesia 1,478,000 33,000 5.8% 2.5–3.1

Wrocław 795,000 84,000 5.5% 2.4–3.0

Gdańsk 192,000 n/a 9.6% 3.2–4.0

Kraków 149,000 n/a 7.6% 4.0-4.1

CommercialCommercialCommercialCommercial PropertiesPropertiesPropertiesProperties

City

New apartments* Offices 1H'13 Retail rents**1H'13

Q2 '13

PLN/sq.m

Change

y/y

Rents** Vacancy Retail

centres

High

streets

Warsaw 8,081 -0.5% 11.5-25.5 10.5% 85 85

Kraków 6,026 -15.0% 13-15 2.71% 41 78

Katowice 5,817 +8.7% 13-14 8.29% 48 56

Poznań 6,341 -8.0% 14-16 14.66% 44 55

Łódź 4,811 -2.8% 12-14 14.97% 31 26

Wrocław 5,970 -7.7% 13-16 12.37% 38 41

Gdańsk 6,403 +0.7% 13-15 11.24% 39 31

*avg, offer-based ** EUR/sq.m/month; Retail units 100-150 sq.m

Country Credit RatingsCountry Credit RatingsCountry Credit RatingsCountry Credit Ratings

Agency rating outlook

Fitch Ratings A- stable

Standard & Poor's A- stable

Moody's A2 stable

Source: Rating agencies

Real EarningsReal EarningsReal EarningsReal Earnings

Average gross wage vs inflation.

100

120

140

160

180

Nov09

Jul10

Mar11

Nov11

Jul12

Mar13

Nov13

Wage CPI

Index 100 = Jan 2005. Source: GUS

Documents

Poland Today Business Review+ No. 018