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French flex savoir- faire during crisis

Although the economic situation in Europe is no picnic, French companies continued to invest in Romania in 2011, hoping that things would improve

July 2012 - From the Print Edition

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The Diplomat – Bucharest spoke to the major French companies on the local market and found out how they have managed to cope with crisis, how they have overcome the problems and the benefits they have found here.
Latest statistics from the French Chamber of Commerce show that France remains Romania’s third biggest commercial partner, with investments of almost EUR 5 billion. French groups present on the local market employ 100,000 people and the companies have a cumulative annual revenue of EUR 14.4 billion. Segments such as retail, auto, medical services, telecom and energy remain some of the most important areas for French investments in Romania. The top two French investors in Romania are Orange and Renault Dacia, with nearly EUR 4 billion spent in the country. In the water and energy sectors, Veolia and Suez-GDF are among the leading operators on the Romanian market.

Big investments in a milk factory

In 2011 Danone invested RON 16 million (approximately EUR 3.8 million) which went into the company’s factory near Bucharest. Some 90 percent of the products the firm sells in Romania are manufactured there. Danone Romania processed some 65 million liters of fresh milk last year, having partnerships with 57 local farms. “Danone Romania is our biggest business in the region and I would say it is also the most successful. The biggest challenge we have so far in the region is Greece,” said Dieter Schulz, general manager of Danone in Central and Southern Europe.
Schulz took over the responsibilities of the group’s dairy division in Romania, Bulgaria, Greece and the countries from the Adriatic region in April this year. He has over 15 years’ experience in the FMCG industry. In 1998 he joined Mars, where he held various positions in different countries and regions. His last appointment was in 2007 at Kraft Foods, where he served as GM for Malaysia and Singapore, based in Kuala Lumpur. In May 2011, Schulz returned to Danone Group as GM for Bulgaria and Greece, for the dairy division.
“One of my main objectives in Romania will be to encourage the consumption of fresh dairy through health awareness programs so that every Romanian will eat at least one pot of yoghurt per day. Statistics show that at present this amounts to only a pot of yoghurt every two weeks,” added Schulz. Per capita yoghurt consumption in Romania is one of the lowest in the region. Romanians eat on average 5 kg of yoghurt each year, whereas consumption reaches 19 kg in Bulgaria, 11 kg in Hungary and 35 kg in France.
This year Danone celebrates 15 years since starting operations on the local market. The French company has invested RON 300 million since 1997 and it now employs 738 people. In 2011, Danone’s turnover in Romania amounted to RON 503 million, up 5.7 percent y-o-y, while sold volumes were flat. The growth rate is below the one reported for the previous year – in 2010 the company’s business grew by 10 percent y-o-y. The decrease in purchasing power continues to be a challenge but, overall, the local fresh dairy market has a lot of potential for future growth, believes the firm.

Orange to bet on mobile internet

“Romania can be proud of its telecom market. Prices are low, network coverage is excellent both for voice and internet, and the choice of handsets and smart phones is very rich. So it is the most competitive and advanced market in Eastern Europe. Even more, I would say that in Romania there is a large openness towards the Western trends,” Jean-Francois Fallacher, chief executive officer at Orange Romania, told The Diplomat – Bucharest. Romanians are a technologically driven nation and, although users are very attentive to the price-quality ratio, they want to benefit from the latest technologies.
The most important changes in the telecom market in 2011 were the increase in customer demand for internet access on mobiles and also an increase in smart phone sales. Sales of smart phones grew by 44 percent in the first quarter of 2012 over the same period last year and the number of tablets tripled.
According to Fallacher, the main challenge is still to increase the percentage of the population that uses the internet. According to a study by Eurostat, only 50 percent of Romanians aged between 16-74 years have used a computer, compared to 96 percent in Sweden, 94 percent in Denmark and the Netherlands, 93 percent in Finland and 91 percent in the UK. The figures are higher for young people, because they understand and adapt more easily to new technologies. The rate among those aged 16-24 years who have used the internet is higher, at 81 percent, but it is still the lowest percentage in the EU. “So, practically, one of our missions is to increase internet access, and for that, we have extended our 3G network to rural areas. Also, over time consumer behavior has changed, which has led to changes in the subscriptions,” he said.
The GM added, “So we went from a personal plan service that has a subscription basis, with or without minutes included, where the consumer could add minutes, text or multimedia messages as needed, to subscriptions that contain an abundance of minutes, SMS and internet traffic.” Three years ago the company made some structural changes to the subscriptions base, in order to adapt to consumer needs, control costs and to differentiate itself on the market. The result was the new Orange portfolio, grouped under animal icons like Delfin, Pantera and Fluture. In 2010 to these were added Colibri subscriptions which offer mobile internet access to customers depending on their activity, time spent and type of access. In March 2011 Orange launched Flamingo, the first subscription in Romania created especially for national and international calls to mobile and fixed networks. This subscription gives customers the opportunity to speak at favorable rates both abroad and at home, and depending on the number of minutes they want.
Also, the Senior offer addressing the communication needs of the elderly is in high demand, while during the December holidays, the most popular subscription was the Junior package associated with the Hello Kitty phone. Currently, the average subscription value in the Orange portfolio is between EUR 8 and EUR 9, VAT included. Orange has around 700 retail stores, which include its own shops, franchises and partners. By the end of the year the company wants to reach 750 stores. “As a business model, we must be closer and closer to where our customers live. It is a strategy in which we believe and we will keep it,” said Fallacher, adding that customers are looking for more personalized offers, matching their own expectations and needs.
The customer is no longer attracted just by a 5,000-minute offer; instead he or she prefers an offer tailored to fit his or her communication profile. “So, our customers are clearly showing interest in not only the traditional voice, which still remains the reason why they use Orange, but the quality of our data network for mobile internet access and our great customer service and large presence in Romania,” added the Orange chief.
Young people are using mobile data services more and more. Also in the market is an increased appetite for smart phones and tablets, especially because people are using internet services, emails, websites and social networks more often. On the business side, companies are using mobile data services in order to allow employees faster access to email and internet or to give the sales staff a more efficient and cheaper way to set up various operations or contracts. By the end of March, 88.9 percent of the population benefited from speeds of up to 14.4 Mbps, the fastest mobile broadband in rural areas in Romania. This process will continue in the rest of the country, in order to cover 98 percent of the population by the end of June 2012.
Regarding the 4G network, Fallacher added that Orange has already tested 4G in Romania and is prepared to launch this technology, which allows data transfer speeds of up to 100 Mbps, shortly after the licenses become available. “In rural areas too our network is LTE ready and the transition to this technology will be simple. In urban areas this service may be available shortly. Also, Orange is a promoter of this technology in the EU, because the network has committed to introduce 4G/LTE (Long Term Evolution) in all EU markets where Orange is operating by 2015.The speed of deployment of 4G will of course highly depend on the conditions under which the license is granted by the authorities to the operators. These discussions are currently ongoing with the ANCOM and Ministry of Telecommunications,” outlined the Orange CEO.

Alcatel-Lucent waits for 4G implementation in Romania

“Telecom today is an environment of radical adaptation to new realities, new demands and new business models. Romania’s telecom market in 2011 remained competitive. While the economy was facing the crisis the telecom companies were facing the challenge to offer high quality services to their customers and fighting battles on various fronts – network coverage, landline and mobile telephony, fixed and mobile data, analog and digital cable,” Raoul Ros, country senior officer at Alcatel-Lucent Romania, told The Diplomat – Bucharest about the Romanian telecom market.
According to him, telecom service providers are looking for ground-breaking designs that will reduce total costs of ownership while flexibly absorbing network growth. To do this, an all-IP transformation of the current existing wireless networks towards 4G LTE (Long Term Evolution) wireless broadband is required.
“Our experts in Timisoara were involved in the deployments of the first LTE networks around the world in the US, Russia, Italy, Spain, Slovenia and United Arab Emirates,” said Ros, adding that in February 2011, Alcatel-Lucent performed the first public demonstration in Romania of 4G/LTE capabilities. LTE is a unique opportunity for telecom service providers to address the insatiable appetite for bandwidth while delivering sustainable profitable growth, say players.
Deploying commercial LTE networks in the region is just a matter of time. ANCOM has confirmed the 4G licenses and associated spectrum tender and so LTE will come to Romania soon after the licenses are granted. In 2010 and for the first time, mobile broadband users surpassed fixed broadband ones. This trend will consolidate in the years to come. Worldwide broadband subscriptions are expected to reach 3.4 billion by 2014 and about 80 percent of these consumers will use mobile broadband. The driver lays in the simple but fundamental value it offers consumers: mobility, being always connected while on the go. LTE is the technology developed especially for the internet era.

CallPoint invests in new contact center in Craiova

Elsewhere, CallPoint New Europe has opened a new contact center in Romania. The site is in Craiova. It has been up and running since June 2, with 200 jobs. With this new facility, CallPoint now has 1,200 seats at group level. “First of all, I should say that choosing Craiova was not easy, because there are many cities in Romania where there are educated and talented people with a good work ethic. Of course, if the purpose of the site had been to serve German customers, we would have eventually picked Cluj. And if it had been French, we could have gone for Iasi. But for Romanian-speaking projects, Craiova was the best strategic choice,” Gregoire Vigroux, director at CallPoint New Europe, a multilingual call center provider, tells The Diplomat – Bucharest about the new investments.
The strategy of the company was to keep serving the international clients from Bucharest (on multilingual projects). The idea of having a second site was to serve local clients (on Romanian-speaking projects). Therefore, the ‘multilingual capability’ was not a criterion that had to apply when it chose Craiova. The company has got 1,200 seats across its three delivery centers: Sofia and Plovdiv (Bulgaria) and Bucharest and Craiova (Romania).
“For five years we have been the interface between national and international companies and their customers and all statistics indicate very optimistic forecasts about the development of this industry. For these reasons we decided to have 2,000 employees in Romania by 2015. The major part of the increase will be made for French- and English-speaking projects. We will therefore have massively to recruit people speaking these languages in Bucharest within the next three years,” said Vigroux, adding that CallPoint is privately held, with the European Bank for Reconstruction and Development (EBRD) as a shareholder. In 2011, the EBRD invested EUR 3 million in CallPoint New Europe, with many of these funds used exclusively to enhance and expand operations domestically.
Currently, the call center industry in Romania employs over 10,000 people. The Romanian contact center market, with an estimated turnover of EUR 120 million last year, is growing rapidly. In the next five years, Vigroux says that its value could even increase to EUR 350 million. As a group, the turnover of CallPoint New Europe reached EUR 10 million in 2011 while in Romania it was EUR 3 million. “Multilingualism is one of the greatest assets of the Romanian economy. This asset attracts measurable foreign investment. Romanian workers are highly educated, resourceful and problem-solvers. Because they speak foreign languages like no other population in Europe, Romanians have changed their country into a major call center hub. And this is just the beginning of the story,” said Vigroux.
According to him, Romanians are internationally known for their high aptitude in speaking European languages: primarily English, followed by French, Italian, Spanish and German. Twenty multilingual major call centers operators have come to Romania in the past 5-10 years, finding a multilingual pool which they can utilize to serve millions of customers across Europe and the USA, by phone, email, chat and other means.
The figures are quite impressive: English is now spoken by 8 million Romanians; French by 4.5 million; German, Italian and Spanish, 1.5-2.5 million. “I would say that the astonishing pool of foreign speakers in Romania is one of the main assets the country has nowadays. And French companies have understood that. Romania’s rising multilingual labor pool has not gone unnoticed by multinational call center organizations that seek to provide support to their international customers across Europe and North America. Call center industry hiring has helped to push the unemployment rate in Bucharest to extremely low levels for advanced multilingual speakers,” concluded Vigroux.

Renault Group driving the car business through the crisis

“Between 2000 and 2011 the Renault Group invested approximately EUR 1.8 billion in Romania for the modernization of the industrial system, training and the development of an engineering and design center. Consequently, the Renault Group has in Romania all the facilities of a car manufacturer, something that gives us a real competitive advantage. In 2011, the investments amounted to EUR 148 million. And we won’t stop here,” Jerome Olive, general manager at the Renault Group, told The Diplomat- Bucharest about company investments in Romania. According to him there are ongoing projects, both in terms of car assembly and in terms of mechanical parts (new engines, gearboxes, and chassis).
The group’s facilities include a design center, an engineering center (which also comprises the only testing center in the region), a car plant, a mechanical plant, an important logistics structure and the largest commercial and repair network. Moreover, Romania is home to the only design and manufacturing unit for stamping tools owned by the Renault Group worldwide. “All this allows us to continuously develop our know-how and to get more workload, especially on what we call the ‘entry range’. The most recent example is the Lodgy, the model that has just been launched in Romania. The Lodgy is not manufactured at Mioveni, but it is a car firmly rooted in Romania,” added Olive.
He went on, “The economic situation is still unstable in the short term and the only sure thing is that whatever forecast for the future we make, it will be proven wrong. Therefore, our main challenge for the near future is to improve our competitiveness and to do our best in order to meet our clients’ expectations in terms of quality and delivery dates.”
For the fifth year in a row, the domestic market is in decline. The main cause is the economic context, which is difficult all over Europe. In Romania this is emphasized by a series of aspects such as limited access to bank loans and the late start of the car scrappage program, a scheme that, when it finally started, had a reduced number of vouchers. “The crisis represented an opportunity for Dacia on certain markets. Car scrappage programs in countries like France and Germany boosted Dacia sales. More than 90 percent of our cars were sold abroad in 2011 and France remained our top export destination. This does not mean that we did not have to face difficult situations. The crisis affected us especially here, in Romania, where the market has slumped by two thirds in recent years. Moreover, since the beginning of this year, the main European markets have also started to fall,” said Olive. He added that for 2012, the Romanian market will continue its fall and will probably reach a historic low. “Anyway, the market evolution depends on the international economic context. Additionally, the circumstances in Romania will also have their say,” concluded the Renault Group head.

BNP Paribas Real Estate: deals take twice as long

Prudence, delays, silence, lack of financing, long-term diligence and the search for secure investments characterize the local real estate market now, as seen by representatives of BNP Paribas Real Estate. Currently, the market belongs to the tenants. “If you have the tenant, you own the deal,” Philippe Mer, head of territories for the CEE region and chairman of the board in Romania at BNP Paribas Real Estate, told The Diplomat – Bucharest. As real estate assets come second in the completion of a company’s balance sheet, closely following the costs of the employees, it is easy to understand the prudence that rules the market.
Prudence and over-caution are the two terms that describe the approach on the Romanian and overall real estate market, representatives of the Romanian office of BNP Paribas Real Estate told The Diplomat – Bucharest. “While years ago, a transaction would have been signed within days or at most months, now the time has doubled and it could take as much as a year to see a contract signed,” said Mer. In 2008, when the real estate market was booming everywhere in Europe, one deal could have been established in a matter of minutes. “This is not a joke. I know a previous case when the client came, saw the office building and agreed on the spot with the deal and the price,” said Mer. More and more players are involved in a deal now, as everyone is searching for further warranties, a second and third opinion, and even then, it is not sure that the deal will really be closed.
With the current buzz regarding green certificates, it seems that the approach is still defined as a “nice to have” asset within a portfolio. Although more and more developers, especially of office buildings, are taking the move towards green certification seriously, it still cannot be described as a solid trend both in Romania and Europe, said the official representative of BNP Paribas Real.
Regarding Romania’s status in the eyes of investors, Mer said that investor feeling had improved for local business in the last few years. “While before, in 2009, investors had tremendous caution regarding countries such as Romania, now, the region, due to a certain stability within the current economic turmoil, has started to attract interest again,” Mer detailed. In Europe, there are silent yet mature markets, such as the UK, France, Germany and Switzerland. That is why the CEE region is described as being home to markets which still have a lot of potential, with Poland, though, delivering the best context for investments, due to its stable political landscape, large domestic markets, legal framework, a positive GDP and good investment yields.
In 2011, BNP Paribas Real Estate Romania posted a turnover of EUR 1 million. “We increased on a decreasing market in Romania, with a double-digit market share,” said the BNP Paribas Romania official. The company, which is active locally with brokerage operations, valuation and a property management division established in 2011, is focusing on the segments that deliver constant cash flow, meaning leasing and sales operations.
A report by the company stated recently that investment activity in Europe has clearly suffered from the economic recession and heightened tensions on the financial markets at the start of the year. Even though retail investment fell 26 percent on a rolling year basis between Q1 2011 and Q1 2012 in the five major countries, the nine major European cities (London, Paris, Munich, Frankfurt, Hamburg, Berlin, Milan, Madrid and Brussels) struck a positive note with an increase of 23 percent.
Prime retail yields seem to have stabilized across all categories and it is highly improbable that they will fall, in view of the continued expected contraction in investment activity in 2012. Yields could rise for lower-category assets of less interest to investors.

Carrefour: We do business in Romania, with Romania

Represented with 85 retail units opened so far in different formats, Carrefour Romania is seen locally as one of the co-founders of local modern retail and the first to have opened a hypermarket in Romania, back in 2001.
With a countrywide reach of 25 hypermarkets opened locally so far, it seems that the expansion for such formats has slowed down in the last two years, meaning we can talk about a certain saturation of the market, the company’s GM, Francois Melchior de Polignac, told The Diplomat – Bucharest.
“These are still good days for hypermarkets in Romania, as the market is delivering high potential for us. We can’t say that we focus on a certain retail format, as the market provides opportunities for a balanced mix, whether they are hypermarkets, supermarket or smaller shops,” he said. Within a landscape where retailers have spread and implemented locally retail formats in order to get as close as they can to the Romanian consumer, Carrefour has adjusted to the current context and is looking into different businesses in order to deliver the expected revenues and operations locally.
“We operate in Romania, with Romania,” stated Polignac, highlighting that the company’s policy is to use a large majority of local products within the retail mix. According to the GM, the company tries hard to welcome Romanian suppliers as much as possible. “Our idea is to be part of the local economy and this involves Romanians and local producers and suppliers too. We have also adjusted to the current conditions. If a supplier can’t afford to supply the Carrefour network on a nationwide basis, our approach is to have a contract with that supplier for a region or a local shop,” he said. Also, the manager disclosed that the private labels mix of the company’s products is also produced in Romania. “It would be so easy and comfortable for us to simply import it, as many other retailer do, rather than going though the local production process, but we have a different approach,” added Polignac.
Carrefour operates on a market when rumors spread easily. Recently, a rumor that German Metro Group-owned Real was in talks with French retailer Auchan over the sale of its Central and Eastern European (CEE) business appeared in a German publication. Real officials did not confirm the reports but sources close to the companies said that the German group was open to all options: a full or partial sale deal, or keeping the division within the group. The German magazine reported that buyers could include retailers such as Carrefour or Walmart. Polignac commented, “This is not the first rumor involving Carrefour on a regional basis; such rumors appear all the time on the market. We do not comment on them and we continue with our business operations on a regular basis.”
Regarding the company’s business figures, according to its overall report, in Europe, group sales decreased by 2.7 percent, with continued weak non‐food spending and further deterioration in Greece. In Romania, the company’s group figures reveal that total sales increased by 6.6 percent in Q1 of 2012 on a constant currency basis. In Q1 of 2012, Carrefour Romania reported EUR 277 million of sales locally, a similar performance as registered in Turkey among European countries.

Citroen Romania: this is a strategic market for us

In the car industry, companies operating dealerships, local representatives and car producers are looking towards a better future and the increasing purchasing power of Romanian clients. In the meantime, they are focusing on improving performance on the short term. According to Citroen representatives, the competitive environment in the automotive industry remains difficult, with pricing pressure similar to the last quarter of 2011 and markets considerably worsened, down by almost 12 percent.
“We will implement strategies to attract investors, clients and business-to-business sales and we also maintain our plans for the development of the network, and for the improving price positioning and hence pricing power,” Marc Gueudin, general manager of Citroen Romania, told The Diplomat – Bucharest. “As we wait to reap the benefits of our investments in Romania, we must continue to work to put ourselves on a more solid footing, as we have been doing since 2007. We have to get ready for the future and execute projects while improving performance in the short term,” Gueudin said.
He continued, “In 2007, when Citroen came to Romania, we set out a vision built around some key ambitions such as to develop responsibly, and to be a step ahead of the competition in products and services in Romania. Since that time, we have undertaken numerous programs, backed up with major investments, to turn this vision into a reality. We have in plan developments – network expansion, especially in Bucharest and in the main cities of Romania, moving upmarket with our products and improving quality – that will help to achieve this goal. This means also improving service quality (to build customer loyalty) across the network,” Gueudin detailed.
For the company, Romania is a strategic market, now one of the largest markets in Europe. In recent years it has developed and changed a lot in a positive way, according to the company official.
“Citroen is also changing, and it’s important that we manage to differentiate ourselves in this market. Audacity, creativity and excellence are the three pillars of a highly dynamic outlook that is expressed not only in Citroen cars themselves but also in the specific response Citroen offers to broader motor transport issues,” Gueudin said.
The French producer’s overall strategy is designed to move the brand upmarket, such as through the presentation of premium models, the development of mid-range models addressing local market conditions and pioneering products and services. According to company data, the brand is to be taken to the next level through the development of useful, affordable technologies like the e-HDi micro-hybrid technology, full-electric and the Hybrid4, with premium vehicles through the full DS line-up starring the Citroen DS5, now on sale in Romania.

Arval Romania focuses on efficiency

Arval Romania, one of the largest operational leasing companies on the local market and owned by financial group BNP Paribas, announced it had attained a turnover of EUR 23.2 million in 2011, an advance of 9.5 percent compared with 2010. According to the company’s representatives, the growth for this year is expected to reach 32 percent. Recently, Dan Boiangiu, commercial director of Arval Romania, told The Diplomat – Bucharest, “Last year was a good period for our company as we consolidated and grew over the advance of the operational market level.”
The company estimated it would reach a total fleet of 5,000 units by yearend, with a current portfolio of 4,300 vehicles. Arval won 22 new clients in Q1 of 2012. “We maintain the growth within a difficult economy which is why we focus on the strategic approach of the business and operational efficiency,” Boiangiu said.
For this year, Arval Romania estimates it will make a total investment of EUR 24 million, EUR 8 million up on last year. The focus in 2012 is consolidating the offer for small and mid-sized enterprises. “Customers plan their car fleet acquisitions in operational leasing contracts in stages: they start with 40 cars and the figure can reach, depending on their operations, as much as 250, for instance,” says Boiangiu. In addition, he said that the practice of visiting clients and making a simple “rate-card services” offer no longer happens and in fact never did in this business. “A customized offer and understanding of customers’ needs to ensure the correct price for both parties is essential, and confidence brings positive awareness on a market which, in Romania, has a large potential but so far has only reached a fraction of the value of other business segments,” said Boiangiu.
At the end of 2011, Arval Romania had 260 partners, 30 percent more than in 2010.

ALD Automotive Group puts focus on e-auction remarketing platform

The ALD Automotive Group has recently announced the sale of its 100,000th used vehicle, through its ALD Carmarket remarketing platform. The e-auction platform was launched two and a half years ago and is currently deployed in 19 of the 37 ALD Automotive entities around the world, including Romania. “It is able to provide an extensive portfolio to its used car clients, covering virtually all markets and models that return from the operational leasing fleet,” said Shane Dowling, general manager of ALD Automotive. In Romania, the platform has been functional since March 2010 and it has become the major means for the firm’s used car sales. According to company data, nowadays, 100 percent of the vehicles returned to the car compound are sold via the bidding website to the dealers. “They represent the main channel for vehicle sales, as 98 percent of second hand cars are purchased by dealers, while the other 2 percent are sold directly to the drivers who used the cars during the contract,” the company’s GM explained.
Group wide, the company has registered more than 900 dealers on the platform, out of whom 380 actively submit offers for vehicles. This increasing e-auction activity, which started with 347 active bidders in January 2012, has led to an improved average for the car stock days, e.g. 14 days in May, which ultimately has a positive impact on the remarketing costs of the used vehicles.
Locally, at the end of May this year, ALD Romania reached a total of 2,722 second hand cars sold through the ALD Carmarket platform since its deployment two years ago. Out of these, 750 were purchased during the first five months of this year by the company’s dealers. In the future, the company intends for the ALD Carmarket platform to undergo further technical improvements and to reach a total of 3,472 used cars sold via the website by the end of 2012, by achieving an additional 750 used car sales across the remaining seven months.
As for the ALD Automotive Group, it is gradually implementing the sales platform in all of its 37 subsidiaries and will continue to promote the sales of used cars through its online platform, aiming at selling up to 90 percent of its leasing terminations via ALD Carmarket in a variety of sales channels by 2015.
Recently, Dowling told The Diplomat – Bucharest, “Romania has seen a significant decline in new car registrations year on year since 2008, which has mainly been due to retail sales and consumer loans. The corporate sector itself has seen the opposite effect, where company cars are still required but the method of funding has seen a radical change.“ The GM, whose company was market leader based on 2011 numbers, added, “2011 in particular saw a substantial rise in operational leasing as a form of funding. This is due to various reasons, primarily liquidity shortage and fleet cost optimization. For this year, these will remain the main triggers of market growth. Furthermore, local companies seem to be becoming more aware of the benefits of operational leasing products, and international companies, accustomed to this type of vehicle financing, are mandating this solution more on the Romanian market.“

Peugeot strengthens dealer network in eastern Romania

Representatives of Trust Motors, the importer of Peugeot cars in Romania, said that car sales through its countrywide network of 23 dealers were estimated at 564 units in the first three months of 2012, up 0.49 percent on the same period of last year. The results came on an overall car market estimated to have decreased by 8 percent so far. Narcis Ghita, general manager of Trust Motors, told The Diplomat – Bucharest, “The company has concentrated on strengthening its dealer network, especially in eastern Romania.”
According to company data, Peugeot will have better dealer representation in cities such as Focsani, Galati and Piatra Neamt. The firm agrees with other car importers that the reduction in this year’s national version of the cash-for-clunkers program, known as “Rabla“, to only 30,000 vouchers, compared with 120,000 vouchers issued in 2011, will limit the scheme’s impact on sales. “The program’s results in the first three months were not sensational and this is due both to the reduced number of vouchers as well as their high sales price, which is rather prohibitive for customers,” said Ghita.
The corporate segment is on the list of main priorities for the company in 2012, as well as the after-sales segment. The importer was established as a company in 1991, as Eurial Invest, and in 2003 it split its activities, with Trust Motors the importer and Eurial Invest running retail activities. Currently, Trust Motors numbers 23 dealers and 33 showrooms countrywide. The company’s turnover in 2011 exceeded EUR 51 million and it expects a similar performance this year too.

Accounting outsourcing is growth engine for Mazars

The sluggish economy has affected service providers. “Business went slowly. Being a smaller company we suffered less, but nevertheless we had limited growth. Last year we had an increase of 5 percent compared to 2010. The worst year was 2009, 2010 was slightly better, 2011 was good, and in 2012 we are suffering again, not at the same level as in 2009 but it’s worse than 2010 and 2011,” Jean-Pierre Vigroux, managing partner at audit and advisory firm Mazars Romania, told The Diplomat – Bucharest about the company’s turnover in recent years. He added that last year the company lost a large audit client in the automotive field.
Mazars has also suffered through the absence of mergers and acquisitions in the market. But the growth engine of the company is accounting outsourcing, which is developing very well. Currently, this segment represents one third of the firm’s turnover. Three years ago it had a turnover of EUR 400,000 on accounting, and this year the law firm expects EUR 1.2 million. “2012 will be another difficult year. We have reached the half-way mark and there is no chance of recovery. We are now waiting for 2013,” said Vigroux, adding that for Mazars’ activity the main problems are lack of investment and unfair competition in audit activity.

Air France: Flying corporate

For Air France, part of joint French-Dutch airline Air France KLM, traffic increased by 10 percent in the first quarter of this year, against the same period of 2011, on consolidated volume coming from the corporate segment. In terms of revenues, the airline estimated an 8 percent rise in 2011 on 2010.
“The corporate segment represents our strength. No matter if it is a global or a local contract, this segment brings healthy revenue. Our loyalty program for small and medium enterprises, BlueBiz, has registered a solid growth in 2012 both in terms of activity and revenue. For individuals, we offer Flying Blue, one of the most generous loyalty programs worldwide,“ said Alexandru Dobrescu, country manager of Air France KLM Romania.
Currently, Air France operates three flights daily between Paris and Bucharest plus two code-share flights in cooperation with its partner Tarom. “We have extended our code-share cooperation with Tarom for routes departing from Bucharest to London and Frankfurt and from Sibiu to Munich for point to point traffic and Bucharest-Nice and Bucharest-Lyon for connecting passengers,” Dobrescu said.
As part of the airline group’s strategy, Dobrescu said its focus for this year is on consolidating the corporate client portfolio, including SMEs. BlueBiz is its attempt to consolidate its share of a more and more competitive market.
In addition, KLM has enhanced its online offers with social media campaigns. It has introduced a program called “Meet and Seat“, which allows passengers to research their fellow travelers via Facebook and LinkedIn. “Through this program, passengers can view the online profiles of other travelers long before booking a seat so they can choose to sit next to somebody they consider interesting or with whom they share interests,“ said Dobrescu. He adds that the program is already a success story and has been expanded from three destinations available at the launch to ten now.
Last July, the group posted a 6 percent increase in passenger traffic into and out of Romania, mainly attributable to multiple group programs for passengers. In 2011, it announced it had a market share of 17 percent. With its two hubs in Paris and Amsterdam, the airline did not see major changes in traffic in 2011 for its two top tourist destinations.
However, demand for European destinations is up to the detriment of long haul, due to smaller budgets. “This is the main change brought about by the recession. Our passengers have preferred to take shorter holidays, mostly long weekends in the big European cities,” Dobrescu said back in 2011.

GDF Suez Energy Romania keeps investment pace despite crisis

With energy being a highlight of investors’ business interest in recent years, the local market has attracted and still attracts enough attention from large companies that work to draft the best feasibility tests prior to making their investments. Eric Stab, chairman and CEO of GDF SUEZ Energy Romania and president and CEO at GDF SUEZ Energy Eastern Europe, told The Diplomat – Bucharest about the company’s ongoing projects. “This year alone we are making investments reaching some EUR 110 million in all development areas of the company’s operations,” said Stab.
At the moment, the manager says, the company invests EUR 35-40 million a year in the network alone. “We have focused on modernizing the company and invested in new, state-of-the-art equipment and tools for the energy distribution network, as we found it in not such a great shape. Our priority is also to improve efficiency and develop effective processes to serve our customers, besides developing new products,” said Stab.
Currently, GDF SUEZ Energy Romania sells and distributes gas to approximately 1.4 million clients, managing a network of around 17,000 km, and is leading the regulated energy market with a share of 50 percent, while, on the free market, it is the third biggest natural gas supplier in Romania, with an 11 percent market share. On the regulated market, the room for increasing its position on the household customer side is limited, so the company needs to find other ways to consolidate the business.
Stab added, “This is why we are now focusing on electricity sales and on energy services. In electricity sales, we have concentrated on B2B customers, with medium-sized consumption, i.e. with not such large industrial operations. In the services sector, at this stage, the focus is on household equipment maintenance, for in-house pipes, boilers and other gas equipment that has to be checked regularly. The second area of focus is to develop, step by step, energy-efficiency solutions to convey to our customers.”
A very significant target among GDF SUEZ Energy Romania’s priorities is the development of renewable generation. For instance, in the middle of March, the company announced the start of construction of a wind park located in Gemenele in Braila County, south-east Romania.
“Basically, at the moment, we are completing the foundations of the wind turbines that we are expecting to be delivered in July. Our target, ambitious as it is, is, after erecting the turbines, to start operations by the end of November this year. We are working hard on it, as you can imagine,” said Stab.
The wind park near Braila is the first such park developed by the Franco-Belgian company in Romania and it is estimated to have a total installed capacity of 48 MW, comprising 21 turbines of 2.3 MW each. The wind turbines will be delivered by Siemens while the civil engineering construction and electrical works are done by Viarom and Energobit.

Schneider Electric Romania predicts good performance this year

As a global specialist in energy management, Schneider Electric is focusing on two main drivers in Romania: renewables, meaning generating green energy, and energy efficiency, optimizing energy consumption.
“For renewables, we have very good opportunities in Romania and we expect many more investments in the next three years. We provide equipment and solutions to connect wind and solar farms to the power grid. And since the clarification of the renewables legislation in Romania regarding the green certificates for solar and wind, the country will continue to attract more investment for which Schneider Electric can provide very good solutions,” Saulo Spaolanse, president of Schneider Electric Romania, told The Diplomat – Bucharest.
With regards to energy efficiency, says the company’s president, Schneider Electric can provide various solutions to optimize energy consumption for infrastructure, industry, data centers, buildings (office, retail, hotels, etc) and residential projects.
“Our products and solutions can save up to 30 percent of the energy consumption. What we actually specialize in is solutions to integrate all systems (light control, access control, fire detection system, electrical distribution panels, data centers) into one platform that is easy to manage and which also optimizes electricity consumption. In fact, we have a unique position in the market since we are able to meet all these needs for office buildings. In addition, we also provide consulting and maintenance services for our solutions,” said Spaolanse.
Company projects include Sun Plaza Shopping Center, where the firm provided solutions for the integrated security and energy management system, safe electrical power and consumption monitoring for EUR 1.7 million. Another example is Apa Nova Bucharest where solutions helped streamline the process of collecting, treating and distributing water to consumers in Bucharest and remote monitoring systems. Innovations implemented by Schneider Electric reduce energy consumption by up to 17 percent, says the company, which means savings of over EUR 600,000.
“We have a long-term growth plan for Romania for our operations, meaning that we want to expand our sales by at least twice the market growth. In 2011, we exceeded this objective and our results put the Romanian subsidiary among the best performers in Central and Eastern Europe. For 2012 we are hoping to repeat this good performance. To achieve this and to support our strategy, we have clear, leveraging action plans and tactics,” said Spaolanse.
In his opinion, the market segment that the company is active in is estimated to grow twice as fast as the GDP growth in Romania. Since the economic downturn many companies have started to pay more attention to costs, trimming spending.
“Until 2008, the market was developing so fast that all companies were focusing on increasing sales and revenues. Once the crisis came, companies started to focus on making their business more efficient. This is when the number of companies interested in our energy management solutions increased significantly and our business in Romania has been growing since then above the market level,” said Spaolanse.

Saint-Gobain Glass expects slight growth in 2012

“Last year was a record year in terms of safety. Romania posted a record decrease in lost time because of accidents in the plant,” Jerome Lionet, general manager of Saint-Gobain Glass (SGG) Romania, told The Diplomat – Bucharest.
He added, “In terms of commercial and financial results, the year was one of contrasts, as the first half was in line with our expectations in terms of development and profitability but the second half was affected by a marked slowdown in activity in addition to an increase in the prices of raw materials and energy. In the end 2011 was a mixed year in terms of results. On average the results for last year were still okay, but less than expected for the local market. The second half of 2011 was severely impacted by low demand and cash issues for customers.”
In terms of expectations for 2012, the Saint-Gobain Glass Romania GM thinks that there will be a slowdown of the firm’s main market which is linked to the building industry. “In terms of big projects there is clearly a slowdown and no big project will emerge this year. We are expecting a flat year in terms of projects and we are counting more on residential and the renovation side in order to improve the energy efficiency of buildings.” All in all for Romania this year SGG Romania expects a slight growth on the market in terms of volume.
In his opinion, there are two big challenges in all the company’s markets: costlier raw materials and the lack of cash. “The impact of the raw material price increase is dramatic as silver prices doubled last year. Also, our glass business is a big consumer of gas and we are impacted by the volatility of gas prices. For instance, in February we saw a 75 percent increase in gas costs on the same month in 2011,” said Lionet.
He added, “The situation of payments from our customers has been getting extremely worrying in the last few months. We have not faced major defaults so far. The clients’ capacity to get credit from the bank has dramatically reduced and we are now the bank for our customers. The payment delays reach on average some 40 days.”
The manager also mentioned that the company kept on investing in its plants. “In glass we have a new production line to produce laminated glass. This will be the first and only such industrial unit in Romania. We invested some EUR 5 million in it,” said Lionet. ■

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