Business Review Issue 2/2014 January 27 - February 2, 2014

INTERVIEW: The Property Fund shares discount remains a tough nut to crack, says fund manager Greg Konieczny, adding that the country needs more champions on the stock exchange to take it from frontier to emerging status »page 9

ROMANIA’S PREMIER BUSINESS WEEKLY

Pundits hope this year will be a turnaround one for the local advertising industry, with a predicted 2-3 percent growth » pages 6-7

JANUARY 27 - FEBRUARY 2, 2014 / VOLUME 17, NUMBER 2

THE LIQUIDITY CONUNDRUM ECONOMISTS EXPECT LOWER BORROWING COSTS THIS YEAR, AFTER THE CENTRAL BANK LOWERED THE MINIMUM RESERVES REQUIREMENTS, WHILE CONTINUING TO REDUCE THE KEY INTEREST RATE »PAGE 5

LOCAL ADSPEND TO INCH UPWARD NEWS

CITY

Drill down

What’s cooking

Romania’s Syscom 18 has ventured abroad for new business and will provide equipment for an artificial drilling island in Abu Dhabi

Kevin Hill, corporate head chef at City Grill Group, tells BR about the Chef’s Academy project and the challenges of his profession

» page 4

» page 12

www.business-review.eu Business Review | January 27 - February 2, 2014

NEWS 3

NEWS in brief BANKING Caixabank closes local subsidiary Spanish Caixabank has closed its Romanian subsidiary after reporting limited success on the local market, according to business daily Ziarul Financiar. The lender entered the country in 2007, hoping to become a significant player in the corporate segment and acquire a retail bank, according to ZF. The bank reached break-even point in 2011 and posted a net profit of RON 8.6 million (EUR 1.9 million) in 2012, according to the Ministry of Public Finance.

The local subsidiary has financed a series of real estate projects, some of which have filed for bankruptcy, such as Laguna Residence, developed by GEA. Courtesy of presidency.ro

ENERGY Five consortia bid for Hidroelectrica IPO Hidroelectrica, the state-owned hydroelectricity producer, announced last Monday that five consortia had submitted bids for handling the company’s initial public offering (IPO) on the Bucharest Stock Exchange.

Constantin Nita, energy delegate minister, said Hidroelectrica would be listed in June, along with electricity supplier and distributor Electrica.

The bidding consortia are: Alpha Finance Romania, Alpha Bank Romania, Deutsche Bank, London subsidiary, SSIF Intercapital Invest, SSIF Broker, UniCredit Bank Austria; Erste Group Bank (syndicate manager), Goldman Sachs International, Banca Comerciala Romana; BRD Groupe Societe Generale (syndicate manager), Societe Generate and JP Morgan Securities; Citigroup Global Markets Limited, Wood & Company Financial Services, NBG Securities Romania, NBG Securities, Swiss Capital, BT Securities; and Raiffeisen Capital & Investment, Morgan Stanley & Co International. A joint commission, set up by the Department for Energy and Hidroelectrica, will assess the offers shortly, according to a company statement.

FINANCE Alro reaches EUR 50 mln financing deal with EximBank Alro, the aluminum maker controlled

by Russia’s Vimetco, has signed financial agreements worth around EUR 50 million with EximBank, Romania’s export-

IMAGE of the week Another wish in the wall President Traian Basescu was in Israel last week, where he took in the Western Wall and Holy Grave. At the Western Wall, the president left a note with a wish, saying that the wish he had left on a previous visit in 2009 had come true, according to Mediafax. While in Israel, he met with president Shimon Peres. He also visited Ramallah, where he met with president Mahmood Abbas. import bank. The loan facility will be used to finance the firm’s current activities and issue bank guarantees and letters of credit for the contracts signed by the company.

ONLINE GfK: Most Romanians sick of cyberspace ads Nearly three quarters of Romanians believe there are too many adverts in cyberspace and 58 percent find online ads annoying, according to a survey carried out by GfK Romania on 524 internet users between 15 and 54. One quarter of internet users who were interviewed said they actually like online ads and 15 percent said they trust their message.

While 80 percent of Romanian netizens notice online ads, about 28 percent are influenced by their message even if they do not click on them.Romanian internet users think that tourism, entertainment, retail and electronics &

home appliances companies can best get their message across online. On the other hand, they feel the online domain is not suitable for promoting products for babies, alcoholic and non-alcoholic beverages, supplements, food and accessories for pets, and political parties.

Tocmai.ro was biggest classified ads website in 2013 The Tocmai.ro site received over 326 million hits in November and was accessed by almost 3.8 million unique visitors, making it one of the most popular websites in Romania and the biggest free classified ads site, according to SATI. The number of views in December fell by about 20 million. The classified ads posted increased by 70 percent against 2012.

By comparison, one of tocmai.ro’s main competitors, Mercador, registered 228 million views in December and was accessed by over 2.9 million unique visitors. Auto sales were the most popular category on the website, accounting for 30 percent of the total number of ads. Second place went to real estate

with 18 percent of ads and third spot to electronics and IT with 16 percent.

PROPERTY Eurostat: local house prices down 2.4 pct in Q3 2013 House prices dropped by 2.4 percent in Romania in the third quarter of 2013 compared to the previous quarter, according to data from Eurostat, the statistical office of the European Union.

Steeper quarterly falls were reported in Slovenia (-4.0 percent) and Denmark (-3.3 percent) while the highest quarterly increases were recorded in Estonia (+5.3 percent), Ireland (+4.1 percent), and the United Kingdom (+2.5 percent).

Overall, house prices, as measured by the House Price Index (HPI), fell by 1.3 percent in the euro area and by 0.5 percent in the EU in the third quarter of 2013 on the same quarter of the previous year, according to Eurostat. Compared with the second quarter of 2013, house prices rose by 0.6 percent in the euro area and by 0.7 percent in the EU.

www.business-review.eu Business Review | January 27 - February 2, 2014

4 NEWS AUTO

ENERGY

Dacia sales accelerate to fresh high in 2013

Syscom 18 to work on artificial island in Abu Dhabi

C

armaker Dacia, controlled by France’s Renault, announced last week that its global sales had gained 19.3 percent to a new high of 429,540 units, despite shrinking demand for new cars in its core markets in Europe and Eurasia.

Local sales rose by 12.4 percent to 24,890 units, on a market that posted the poorest performance since 2000.

The best sold model was the Dacia Logan Sedan, followed by the supermini model Sandero and the Duster SUV. The carmaker said its local sales had risen in volume for the first time since 2007 and its market share climbed to 31 percent, the biggest globally.

“We have been able to grow our market share in terms of companies and individuals, helped by the Remat program (e.n. cash for clunkers scheme),” commented Thomas Dubruel, commercial director of Renault Group in Romania. Companies generated 77 percent of Dacia’s total sales in Romania.

The firm, which makes cars in

Mioveni, Pitesti County, announced last week the launch of a massive revamping of its network of dealerships in Romania that should be completed next year, as part of a consolidation effort.

“Our dealers are not doing that badly.

2013 was better than the previous year, because we sold more and on average each dealer sold two more cars. This is a message of confidence for our dealers, in the network, in Romania and in the relaunch of the market,” said Dubruel.

Dacia marches on abroad The carmaker said its deliveries abroad rose by 26 percent last year to pass 404,000 units, out of which over 290,000 sales were made in Europe.

France remained the main market for Dacia with 94,000 sold units, followed by Germany, with 47,000. Over 30,000 cars were sold in Algeria, Turkey, Spain and Morocco.

Dacia entered the British market last year where it sold over 17,000 vehicles. ∫ Ovidiu Posirca

A fiscal metering installation completed by Syscom 18 in Ruse, part of the Giurgiu-Ruse gas inter-connection

S

yscom 18, a system integrator for the oil and gas sector, will work on an artificial island in Abu Dhabi, as part of its efforts to expand operations beyond the local market.

The Romanian company will engineer and manufacture 12 diesel pumping and metering skids for truck loading, on a contract worth over EUR 1 million.

The skids will be delivered in two stages this year, according to Ion Andronache, CEO of Syscom 18.

Zakum Development Company (ZADCO), which is majority owned by Abu Dhabi National Company, decided in 2009 to build a series of artificial islands in the Arabian Sea to increase production at its Upper Zackum field, offshore Abu Dhabi.

“Though not an entirely new concept to the industry – they have been used off the coast of California and using ice in Alaska – artificial islands constructed for drilling purposes remain extremely rare and have never been executed on this projected scale before,” Andronache told BR. The company aims to increase field production from 550,000 to 775,000 barrels of oil per day by 2015, and maintain this production for 2015.

Initially Zakum had thought of installing 25 wellhead platform towers on the fields, along with hundreds of kilometers of new flow lines. This should have been done in conjunction with US oil major ExxonMobil, which is a minority shareholder in the development company.

The Romanian company has sealed contracts worth EUR 5.5 million this year, out of which EUR 2.5 million are export deals. Its expected turnover for this year stands at EUR 15 million.

“We will focus on areas where we already have good references, the Middle East and Central Asia,” said Andronache.

Aside from the Abu Dhabi project, the firm will engineer and manufacture

metering skids for a small gasoline and diesel terminal for truck loading in Congo, which is a fresh market for the company. Back home, Syscom 18 will provide the fiscal measurement system for the Iasi-Ungheni pipeline, which is a new gas inter-connection between Romania and the neighboring Republic of Moldova, at an overall cost of EUR 26.5 million.

“We believe 2014 will be much better for the Romanian oil and gas industry, with many more investments not only from the big players but also from many other small players active in Romania in recent years. This is probably the best news: more newcomers on the market,” said Andronache. ∫ Ovidiu Posirca

WEEK in numbers

EUR 1.2 bln is the value of the M&A market in Romania over the past year, according to the CMS and Deal Watch survey, Emerging Europe: M&A Report 2013/14

100,000th Ford B-MAX rolled off the assembly line in Romania last week at the carmaker’s plant in Craiova. The vehicle was produced for a local customer and is fitted with a 1 liter EcoBoost engine, also manufactured in Craiova

www.business-review.ro Business Review | January 27 - February 2, 2014

NEWS 5

STOCK EXCHANGE

Local stock exchange grapples with red tape

Mark Gitenstein, member of the board of nominees at the Property Fund

T

make more progress in modernizing its financial regulatory structure, which would make the country more appealing to investors and issuers alike,” said Butcher.

The FP has been one of the supporters of a major reform within stateowned companies, some of which have been listed on the local stock exchange. This involved the appointment of professional managers and administration boards at key companies, in a bid to make them more transparent and resistant to political pressure.

The program has registered mixed success: for example, at CFR, the board has been changed for the third time in less than a year.

However, Gitenstein believes in the program, despite the setbacks. “It has not happened fast enough, but when it happens it has a tremendously positive impact,” said the board member.

he Bucharest Stock Exchange needs to further remove cost barriers and streamline regulations to make it more appealing to Romania strengthens rule foreign investors, argues Mark Giten- of law stein, member of the board of nomi- Gitenstein is the former US ambassador nees at the EUR 3.3 billion Property in Romania, and has remained active Fund (FP). in the private sector since completing Gitenstein says it is often his diplomatic duties in December “very difficult” to get the answer to a 2013. Earlier this month he was apquestion and that the regulations pointed advisor of Romanian insurer seem to be long-winded and unpre- Astra. dictable.

BR asked the former diplomat how “Capital markets move very quickly Romania has done on the rule of law and capital itself is fungible, and can since he finished his mandate. go anywhere in the region. Where it “It is getting better and the whol is hard to get decisions, and when e time I was here I felt it was getting you have indecision like this, it is stronger and more sustainable and I safer to put your capital in another feel the same is true even with the place so this is going to discourage new Cooperation and Verification foreign direct investments here, es- Mechanism report. There is a general pecially in equity markets, where the improvement,” said Gitenstein, adding regulatory process needs to be changed. that he had not read the report in Also the fees are very high here, prob- detail, but had seen only a leaked ably the highest in the region, and I version in the media. Asked when just think that’s unnecessary, also dis- the US would appoint a new ambascouraging investments,” Gitenstein sador to Romania, he replied, “Soon, told BR. I hope.”

The BSE is currently grappling with Gitenstein added that the country low levels of liquidity despite having needs a transparent legislative process, over 80 listed companies, and the re- referring to the quick approval of cent initial public offering in Romgaz, amendments to the Penal Code in Parthe state-owned gas producer, has in- liament last month, which came under creased liquidity to its highest level heavy criticism from embassies, inin the last six years. cluding that of the US. He said the Duane Butcher, US charge d’affaires, manner in which the proposal was said last week, on the occasion handled had “undermined its crediof the three-year anniversary of bility.” the FP’s listing, that the BSE’s capiThe amendments would put in talization is only 1.27 percent of the place a special regime regarding antiGerman Stock Exchange, and 12 per- corruption investigations against cent of that of the Warsaw Stock the president and MPs, along Exchange. with other members of the liberal pro“In order to tap the full potential of fessions. ∫ its capital market, Romania needs to Ovidiu Posirca

CEO CORNER Gabriel Pantelimon General Manager of Xerox Romania

Is it again time for optimism and positive thinking in business?

What a great experience the past five years have been in Romanian business! After the monotonous growth between 2004 and 2008, since 2009 we have been exposed to such a big variety of business situations that we had never seen before, and we have learned so much!

Do the above statements look like the words of an optimist, or what?

From the managers and leaders fighting for their companies, their people and their own “survival” in the last few years, day in, day out, with pressure from shareholders and owners increasing to irrational levels and usually going against the market situation and trends, restructuring and optimizing, cutting costs, reducing personnel development and motivation budgets and paring back marketing investments, these statements might attract at minimum an “are you serious?” look.

Fashionable pessimists, who according to a joke are the “well informed optimists”, will at best pity the speaker and never talk to the “Martian” again.

However, there is truth in these statements and a lot of it. And in a moment of honesty, most will agree.

We learned a lot and we had practice and took decisions that we had never had to take before. Some of us changed and adapted strategies, teams, plans, actions and even visions on the way! Some did not adapt and maybe they changed their place or their market.

It is just that we have had enough of these lessons. It has already been five years, longer than an MBA program and as long as a university degree. I believe most of us have already graduated and we have even done our apprenticeship period! Let’s go to real work now!

It is time to look more into business development and towards growth. Somebody said that the re-

cent market conditions are the outcome of a mental state, a defensive and survival attitude.

We are now at the beginning of another year and we just cannot afford to start business in this safe mode. We should bring back the optimism and the investment appetite and also start making some before harvesting.

It is an attitude, yes, backed by hope, but if as many businesses as possible do not act in that way, we will again find ourselves discussing survival later in the year. Growth is much more fun, remember? Now is the time for optimism and positive thinking. This time it might really work!

Gabriel Pantelimon January 2014

www.business-review.eu Business Review | January 27 - February 2, 2014

6 LINKS

Advertisers hope dynamic online market will boost under-pressure adspend Advertising executives are keeping their fingers crossed that this will be a turnaround year for the industry, which has been reeling under the economic crunch for the past five years, decreasing to approximately EUR 295 million in 2013. Pundits say the trend is towards consolidation of the market. Mergers and acquisitions, of which there were several significant ones last year, are expected in 2014 as well. ∫ OTILIA HARAGA “As on most markets worldwide, large and mainly international agencies control the largest market share. Smaller agencies have their own place and role in the market, contributing to the health, livelihood and competitive spirit of this industry, and quite often surprising commentators with their originality and creativity. On the declining market of the past five years, which will probably remain flat in the immediate future, mergers and acquisitions are a natural solution to increase market share. So we will probably see such moves in 2014 as well,” Veronica Savanciuc, president and CEO of Lowe Romania, tells BR. The most important such move last year came from Publicis Groupe, which consolidated its local operations by reaching a 51 percent stake in five affiliated agencies: Leo Burnett & Target, Starcom MediaVest Group, The Practice and iLeo (all part of Leo Burnett Group) and Optimedia (part of Publicis Romania). Prior to the deal, Publicis owned 35 percent in Leo Burnett and 35 percent in Starcom, but had no stake in iLeo, The Practice or Optimedia.

Before that, Publicis Groupe had taken control of media buying company Zenith Romania.

In another transaction, APG|SGA, Switzerland’s leading out-of-home advertising company, sold its entire participation in Affichage Romania to Rene Rosenberg, the current local CEO, acting with co-investors.

Also, a group of Romanian investors acquired from Slovak JOJ Media House the full share package in Euromedia Holding, the leading outdoor advertiser in Romania.

In the digital field, a merger between Hyperactive and Senior Interactive led to the creation of the new digital agency Senior Hyperactive.

“This year there have been a few important mergers and I believe the trend will continue and two models of business will remain: the large agency that has the upper hand when it comes to implementation force, and the smaller agency that will show its muscle by coming up with original ideas,” Alina Tudose, head of strategy and managing director at CohnandJansen JWT, tells BR. Regional and global infrastructure,

While signs are auspicious for the international advertising market, in Romania the industry is still stuck in its tracks

access to resources, and the globalization or regionalization of communications have had an important word to say, comments Victor Dobre, executive director of IAA Romania. “Still, real economic growth can trigger the appearance of new local clients. These in turn could fuel the growth of local agencies,” he explains.

Total net adspend in Romania was set to decrease further in 2013, to an estimated EUR 295 million, from EUR 303 million in 2012, according to data from the Media Fact Book Romania 2013 by Initiative Media.

“Given the overall economic conditions, both at local and European level, I expect the market to stabilize. To keep an optimistic outlook, I hope there will be growth, albeit a modest one, of 2-3 percent,” Savanciuc tells BR. All media channels posted decline, except for online, which saw 21 percent growth in 2012 compared to 2011, fueled mainly by SEM and Facebook.

TV continued to hold the largest market share of net adspend, standing at 64 percent in 2012, and an estimated value of EUR 183 million in 2013.

“I think TV has and will remain one of the outlets worth putting your money in,” Tudose tells BR. However, Dobre adds, “TV can continue its role as a leader only if it adapts and becomes open to integration with other outlets.”

Internet advertising stood at 14 percent and an estimated EUR 46 million in 2013. “The growth of digital and the opportunities it brings such as geo-targeting, cross-channel marketing, database management optimization, actions beyond simple CRM, growing consumer involvement in the story and changing the paradigm of service payment – this is the organic evolution of the market,” comments Dobre.

Outdoor accounted for 10 percent of the adspend mix in 2012 and an estimated EUR 28 million in 2013. “OOH is

where I am expecting the biggest surprise. The importance of this channel is beyond any explanation; so too the need for measurability and efficiency. I will support any initiative in this direction,” said Dobre.

Print took the brunt, stabilizing at 7 percent of the advertising mix and an estimated value of EUR 19 million in 2013. “Everybody is predicting a decline in print in favor of digital. I do not see any conflict here. (...) Producers of print content will definitely know how to calibrate their actions so that they can satisfy old-fashioned consumers and technology lovers at the same time.

They have already been reinventing themselves for some time,” says Dobre.

Finally, radio had a 6 percent share in the mix, and an estimated EUR 19 million last year.

In addition, an emergency ordinance adopted last year dealt a heavy blow to the industry, barring agencies from acting as intermediary agents and

www.business-review.ro Business Review | January 27 - February 2, 2014 thereby losing them revenues from such services. The ordinance also brought a reduction in agency jobs, as well as difficulties in engaging in tenders, affecting the agencies’ freedom to conduct their business according to international standard practices, according to the Media Fact Book Romania 2013.

“After five years of consecutive decline, ‘seasoned’ with legislative surprises, it is hard to give an optimistic forecast. The advertising market is directly influenced by consumption. If consumption does not grow, it is hard to foresee adspend growth. For consumption to grow, lending must grow.

However, the currency exchange also matters here... and so on. There are very many things to take into consideration when forecasting the future in Romania,” Dobre tells BR. “Although this should not be the

*Net adspend in 2013 l TV adspend EUR 183mln l Print adspend EUR 19 mln l Radio adspend EUR 19mln l OOH adspend EUR 28mln l Internet adspend EUR 46mln l Total adspend in 2013 EUR 295mln

* Initiative Media estimations

case, recent history has proven that prognoses – even those made a year ahead – are very easily contradicted and the framework in which we will act tomorrow may be unpredictable.”

From a political viewpoint, this year will be eventful, with the elections for the European Parliament due in May and presidential elections most likely in December. However, advertising professionals canvassed by BR do not foresee a major impact on the industry’s revenues.

“Previous elections have had a diminishing impact on the advertising industry. I think this trend will continue with the 2014 elections, so I estimate that their effect on the advertising market will be negligible,” says Savanciuc. Dobre nominates the Winter Olympic Games and the FIFA World Cup as “the events of the year” for the advertising industry. “I hope these events will generate both supplementary sums compared to 2013, but also fresh content that will fuel growth,” he says.

In conclusion, Tudose says, “Developed economies seem to have overcome the peak of the crisis and the advertising market is now growing.

Not in Romania though: here it will most likely remain the same. And this is actually reason to celebrate, because until now it has kept on decreasing every year.”

LINKS 7 “To keep an optimistic outlook, I hope there will be market growth, albeit a modest one, of 2-3 percent.” Veronica Savanciuc, president & CEO Lowe Romania International trends turned local practices Some trends in international advertising are beginning to make their presence felt in Romania.

According to Dobre, advertising at global level is more and more focused on content. “Unfortunately, in Romania, it is still centered on price. But things will work out naturally. Mobile and digital marketing solutions as well as cross-channel marketing, as long as they are understood and properly done, will start being sought after,” he says.

Media outlets are also increasingly open to collaborating with agencies, he points out. “Conventional formats will disappear, leaving room for communication solutions that do not look like advertising.”

In this sense, he adds, “Twitter mainly, but also the rest of the social

networks, will grow a lot, and we will no longer be able to tell whether we are talking about paid content or content generated by consumers.”

Savanciuc points out that international trends favor the growth of mobile marketing. “Given that the local market lags behind in this field, I believe that in 2014 we will see significant growth – up to 20 percent – of this segment on the Romanian market,” she adds.

Digital, which has been bucking the trend by posting very good figures in recent years, will continue to weigh more and more in the communication mix. Savanciuc says its growth will be fuelled by performance media, realtime communication and the mobile.

“By giving consumers a voice and their disposal an unlimited amount of information, digital has empowered people to discuss, influence and even decide the success of the brand. Moreover, since the means and places where people consume information have long been a game changer, digital will represent an immense source of information and feedback from consumers. In this context, the winners will be those who know how to use this data to channel their resources towards precise goals, with relevant and customized content, and very importantly – in real time,” she concludes. otilia.haraga@business-review.ro

www.business-review.eu Business Review | January 27 - February 2, 2014

8 MONEY

Local lenders face excess liquidity conundrum With the central bank having lowered minimum reserve requirements for lenders, freeing up around EUR 1.4 billion of fresh funding in the market, and continuing to reduce the key interest rate, economists predict more easing this year, which will result in lower borrowing costs. ∫ OVIDIU POSIRCA

Eugen Sinca, chief analyst at BCR, reckons the NBR will further cut the key interest rate to 3.5 percent in the first trimester of this year, while the minimum reserve requirements in RON

RON 6-8 bln bank liquidity on the market

RON 4 bln & EUR 500 mln fresh funding released after the central bank reduced minimum reserve requirements for banks

Courtesy of OTP Bank

Monetary easing set to continue in 2014

Courtesy of RBS

The National Bank of Romania (NBR) decided in early January to cut lenders’ minimum reserve requirements ratio of RON-denominated liabilities from 15 to 12 percent. Reserves for foreign currency-denominated liabilities have fallen from 20 to 18 percent.

Supporting sustainable lending and bringing the reserves in line with European Central Bank standards were cited as the main reasons for this decision.

The reserve reduction started last week, and central bank governor Mugur Isarescu added that around RON 4 billion and EUR 500 million would be released as a result of this move. This would add to the overall banking liquidity of around RON 6 to 8 billion.

“Those banks that did not have an excess of liquidity will go less on the monetary market, will continue the lending process, maybe in an accelerated rhythm. RON lending is improving. The fact that overall lending is falling is exclusively due to foreign currency lending,” said Isarescu this month.

The central bank has also continued to cut the key interest rate to a fresh low of 3.75 percent, continuing a trend that started in July 2013.

Claudiu Cercel, deputy general manager, BRD Groupe Societe Generale

Florentina Cozmanca, senior economist, RBS

ary 4, adding that the minimum reserve requirements are set to fall further as well.

“The cut in the monetary policy rate, as well as the reduction of the minimum reserve requirements ratios, will be rapidly reflected in the reduction of interest rates in the banking sector,” Cozmanca told BR. The favorable evolution of inflation, coupled with the persistent deficit of aggregate demand and interest rates on the inter-banking market, could trigger a reduction of the key interest rate by 50 basis points, in two steps by year end, reckons Claudiu Cercel, deputy general manager of BRD Groupe Societe Gencould go below 10 percent.

“With inflation staying in the 1 to 1.5 erale. Some commentators have argued percent band in the first semester of that the lower key interest rate will fur2014, the weak growth in RON-based ther deter households and companies lending justifies the additional easing of from saving, although the governor the monetary policy, both by reducing says banks have done a good job in sethe interest and by lowering the curing long-term deposits.

“If the reference rates and lending mandatory reserves and introducing additional liquidity in the market,” rates are decreasing, saving rates will do so too. But, it may have an effect on Sinca told BR. Sinca says that the monetary easing the deposit volumes in banks, because that started in the second half of last in Romania customers still haven’t acyear has paid off as interest rates on cepted that very low rates exist, like the new RON-based loans fell by around 2 ones in the Euro zone. If the previous percent in this period. He added that years’ excellent deposit growth stops, it something similar could happen this may harm lending as well,” Laszlo Diosi, year, when RON-based loans should CEO of OTP Bank Romania, told BR. support to a larger extent private companies’ investments and household Additional liquidity funneled consumption. towards debt payment Florentina Cozmanca, senior econ- The lower reserve requirement has omist at RBS, predicts a reduction of given lenders some breathing space, the key interest rate to 3.5 percent at the and some will pay their debts, accordnext NBR meeting scheduled for Febru- ing to Isarescu.

“Never in the last 20 years have we had more favorable conditions for lending to companies in the local currency,” Claudiu Cercel, deputy general manager, BRD Groupe Societe Generale.

Laszlo Diosi, CEO, OTP Bank

The BCR analyst says that some of the fresh euro liquidity may be used by banks to reimburse short-term external financial lines, which would reduce Romania’s dependency on external flows of capital. “The liquidity in RON could easily be absorbed within large infrastructure projects, such as motorways built in public private partnerships or equipping the agricultural sector with modern equipment if we see an enhancement of farmland consolidation in 2014,” says Sinca.

Diosi of OTP adds that the majority of the funds will stay in the country, although some lenders will continue to make due payments to parent banks or to external markets.

As the three-month Robor index (the average interest rate for RON loans on the inter-bank market) has fallen below 2 percent, lending in RON is set to pick up, according to Cercel of BRD. He says interest rates of between 3.5 and 5.5 percent in RON for SMEs consolidate both their borrowing capacities and their financial stability perspectives by eliminating the risk component in the exchange rate.

“Never in the last 20 years have we had more favorable conditions for lending to companies in the local currency: economic growth, abundant liquidity and interest rates in the local currency comparable to or more favorable than those in foreign currencies,” Cercel told BR. ovidiu.posirca@business-review.ro

www.business-review.ro Business Review | January 27 - February 2, 2014

MONEY 9

Removing share discount remains priority for Property Fund manger Greg Konieczny, fund manager of the EUR 3.3 billion Property Fund, says that removing the current discount of 33 percent on the fund’s shares remains a key priority. He adds that the fund has attracted over EUR 1.2 billion in direct investments from international portfolio investors in the three years since it was listed on the Bucharest Stock Exchange.

Yes. The aim of each offering should be to maximize demand; we know it through our shareholders and we do meet other foreign investors. A lot of them have no accounts or trading activity in Romania, and have no intention of doing it at least for some time, so why keep them away from investing in Romanian equities? As long as they can become shareholders even through GDRs (e.n. global depositary receipts) in London, they are still shareholders in these companies. So then it is easier to bring them into Romania rather than just start from scratch and abandon them completely.

∫ OVIDIU POSIRCA Are shareholders satisfied with your performance as administrator of the Property Fund?

You should ask the shareholders! But the share price is also an indication of this, and it is close to an all time high, so we have delivered something.

How do you plan to further reduce the discount on the FP shares this year?

We will continue what we have been doing so far. The buybacks, the distributions to shareholders, and also (e.n. other measures) like increasing the value of our companies and the Net Asset Value (NAV). This can be partially done through different actions we take with companies and there are also IPOs and sales to strategic in-

Property Fund, three years since the listing Courtesy of Property Fund

l Share price reached a record high of RON 0.8605 in December 2013, up by 56.6 percent on 31 December 2012 and 32.5 percent compared to the first listing day l Discount narrowed to 30.8 percent in December 2013, compared to average discounts of 55.7 percent in 2011 and 50.2 percent in 2012 l Net Asset Value (NAV) rose by 22.81 percent between 31 December 2010 and 31 December 2013 to EUR 3.35 billion. Some 55 percent of the NAV is in listed equities and 42.5 percent unlisted l Average daily turnover in December 2013 stood at EUR 3.15 million l Largest minority shareholders are US hedge Fund Elliott Associates with a 14.95 percent stake and Morgan Stanley with 5.14 percent l Total number of shareholders is 8,159 l FP concluded two buyback programs worth RON 1.1 billion (EUR 242 million) l FP paid around EUR 600 million in dividends

vestors to make the portfolio more liquid and lower the share of unlisted companies in the portfolio.

Were the sales of stakes in OMV Petrom and Transgaz one-off events or part of a wider strategy?

In order to do the buybacks and the distributions to shareholders, you also have to generate cash, so the proceeds from that kind of transaction are available for the buyback of shares and for distribution. In the future, we may do similar transactions or may do something different, but right now we are increasing the scope and actions that we can take with more and more companies being listed.

How much investment has the fund attracted?

It is EUR 1.2 billion in terms of new

foreign institutional investors. They invested this in order to increase their share in the FP. The investors come from the US, the UK, Western Europe, Eastern Europe, and some from the Middle East.

Is the Romgaz IPO enough to turn the country into an emerging market?

There are some requirements in terms of the size of the companies and the free-float, and it is not enough. The free-float from companies such as Romgaz and OMV Petrom should increase, but one or two bigger (e.n. companies), and also larger free-floats are needed to qualify for the upgrade.

Should the government pursue dual listings for the upcoming IPOs in Hidroelectrica, Electrica and Oltenia Energy Complex?

Do you think the appointment of private managers to state-owned companies has failed?

No, I think that we’re seeing, also at some of our companies (e.n. in the FP portfolio), really positive changes thanks to this law. We did support it, and it is definitely not a failure. It is a positive development and, okay, there are some improvements to be made.

Why do you think professional boards are changed all the time at these companies?

That was the rule before: every time there was a change in the ministries and the secretary of state, the boards would also change. Now this process is much more difficult although you still see it, especially in the Ministry of Transport companies, which are not in our portfolio. The boards and management teams at the companies in our portfolio are now much more stable.

What is your outlook on the economy this year?

We would not be surprised if the economy exceeded 3 percent growth based on export growth and production growth in the economy. The new drivers should be domestic consumption; the economic situation has really improved a lot. People are making more money so they should start spending, plus there are EU funds and other investments in infrastructure. ovidiu.posirca@business-review.ro

www.business-review.eu Business Review | January 27 - February 2, 2014

10 FOCUS

FMCG retailers push forward online expansion Some 7.2 percent of Romania’s online shoppers bought food products over the Internet last year, up from 4.8 percent in 2011, according to a Daedalus Millward Brown report. Retailers such as Carrefour and Cora predict that the number will go up even further over the coming years and have already invested in online stores.

Others are ready to make the same move. ∫ SIMONA BAZAVAN Online retail has grown constantly in recent years, with electronics and clothing purchases leading the way. As local online shoppers are overcoming skepticism surrounding online payments and paying for products without actually seeing them, grocery retailers are betting that the share of online grocery sales will pick up.

This will be fueled by Romania’s high internet and social media penetration, fast broadband, a general interest in online sales and increasing numbers of busy city dwellers looking to save time by purchasing their groceries online.

Retailers going online is one of the major trends predicted for the local retail market in 2014, Michael Weiss, partner with A.T. Kearney’s Bucharest office, recently told BR. “We are expecting significant changes in digital retail. If you consider a market like Romania where a discounter such as Lidl has more than 1 million Facebook friends, you can see a clear indication of the market potential,” he said. With the right strategy in place, the shift towards online looks like the most promising game changer this year, across formats, but also for urban versus rural retail segmentation, he believes.

Cash and carry company Selgros Romania is the most recent player to claim a piece of what should be, in the not too distant future, a booming niche. Others are expected to make the same move as early as this year.

Mega Image hinted in 2013 at plans to open an online store in early 2014 and after launching a drive-through service at the end of 2013, Cora also wants to offer home deliveries through its online store.

Only two weeks ago, Selgros started selling on the web following a partnership with online platform MegaMarket.ro. The site is managed

by A4K SWED Concept and sells exclusively Selgros products.

Some 11,000 food and non-food items sold by Selgros are available on MegaMarket.ro and the number will rise in the near future, said the company. Orders are placed online and

Digital hypermarket: Carrefour wants as many as 50,000 products listed on the online store

payment can be made either online or by cash on delivery. Companies can also pay by bank transfer.

For now the service is available in Bucharest, Otopeni and Corbeanca. In the second quarter of this year, it will be rolled out to Cluj-Napoca, Timisoara and Brasov and by the end of the year in all the large cities throughout the country, said Pia Krauss of Selgros Cash & Carry Romania. The firm has been operating in Romania since 2001 and has opened 19 outlets.

From bricks and mortar to online In January 2012, wholesaler Metro Cash & Carry became the first big name in Romanian retail to launch an online store, albeit one selling only stationery items and various electronic appliances.

More than a year later, in July 2013, the Romanian subsidiary of French Carrefour officially launched its online store – carrefour-online.ro. The retailer thus became the first large Romanian FMCG retailer to launch such a service.

At that time company representa-

tives said online grocery sales were very low in Romania but predicted that over the next two to three years Romania would “burn phases” and their share in total grocery sales would surpass the Western European market average, which last year was about 1.5 percent.

Online grocery sales could have a similar evolution to the trajectory electronics sales have posted over the past few years, suggested Vlad Ardeleanu, commercial director at Carrefour Romania, adding that there is a general interest in online sales and that other large FMCG retailers could soon invest in similar platforms.

The retailer did not make public information on the investment made in the site or its sales target. Carrefour’s suppliers do not have to pay extra fees to be listed on the online store and the online portfolio is selected entirely by the retailer, Carrefour representatives clarified.

In the first few months since opening, the online store reported “thousands” of customers and the average order was “considerably above” the minimum required order of RON 150

(approximately EUR 34), said Carrefour representatives. The best sold products have been bottled water, fruit and vegetables, and detergents.

The orders are delivered by Fan Courier with whom Carrefour has an exclusive agreement for a RON 15 (approximately EUR 3.4) transport fee, regardless of the location and quantities purchased. The service is so far available only in Bucharest and some neighboring areas.

The online store initially sold around 10,000 grocery products but the number is expected to reach

RON 220

or about EUR 49, the average spend for Cora’s drive-through service, higher than the average in-store spend

www.business-review.ro Business Review | January 27 - February 2, 2014 50,000 by early 2014, which is the usual number of items found in a regular Carrefour hypermarket.

French savoir-faire It was a novelty when Romania Hypermarche, the company operating the Romanian Cora hypermarket chain, launched the first local drivethrough service at the end of last year, but back in France it is available in over 2,400 locations. Cora offers a drive-through service in 56 stores in France and now hopes to replicate its success in Romania.

The service targets some 380,000 of Cora’s more than 2 million customers who regularly shop online, said company representatives at the launch event.

Customers can buy products online and later pick them up at the hypermarket. The minimum order is RON

50 (approximately EUR 11.25). Shoppers can choose from over 10,000 products, with several hundred more joining the virtual shelves each month. The service was launched at the Cora Lujerului hypermarket in Bucharest but it should be available in new locations soon.

There are 22 orders on average each day with the target to reach 90 by year end, Ana Maria Florea-Harrison, Cora Romania’s PR officer, told BR. The average spend is RON 220 (approximately EUR 49), higher than the average store spend, she added.

During the holidays, both the number of orders and the average spend were up, peaking at RON 1,400 (approximately EUR 309).

The best sellers are drinks, dairy products, fruit and vegetables, meat products, detergents and organic products. What is interesting is that

FOCUS 11 shoppers’ first choice is not entrylevel products but the opposite, said Florea-Harrison.

As for launching home deliveries, the Cora Romania representative says this is in the pipeline. “We are still working on this. We chose to launch the drive through in the first phase because our hypermarkets are proximity stores and we wanted to reach mainly customers living nearby and who don’t have time to do their shopping,” she added.

The target for the first year is for the drive-through service to generate some 5 percent of the hypermarket’s turnover and for the average receipt value to be 40 percent higher than the regular in-store spend, said company representatives. Cora operates a network of 12 hypermarkets in Romania, two of which were opened last year.

The local online shopper

“We are expecting significant changes in digital retail. If you consider a market like Romania where a discounter such as Lidl has more than 1 million Facebook friends, you can see a clear indication of the market potential.”Michael Weiss, partner with A.T. Kearney’s Bucharest office

Some 7.2 percent of Romanian’s online shoppers bought food products via the Internet last year, up from 4.8 percent in 2011, according to a Daedalus Millward Brown report.

Overall, more local consumers shopped online, regardless of the product or service. The share of Romanians with access to the internet who made online purchases in 2012 was 20.9 percent, up from 15.1 percent the previous year and 8.9 percent in 2007. However, the average purchase

20.9 %

the share of Romanians with internet access who made online purchases in 2012 frequency remained broadly constant.

The most popular online purchase in 2013 was the payment of utility bills (42.8 percent of respondents), clothing and shoes (37.8 percent) and electronics (37.4 percent). The online purchase of groceries was still relatively uncommon, ahead only of categories such as sporting goods (6.8 percent) and music/movies (6.3 percent).

The top three reasons for not making online purchases in 2013 were lack of trust when paying for a product without seeing it (48.1 percent of survey respondents), lack of trust in giving out a card number on the Internet (35.4 percent) and lack of a card to pay for online shopping (27.8 percent).

The impact of the first two factors has been diminishing since 2011, according to Daedalus Millward Brown. simona.bazavan@business-review.ro

www.business-review.eu Business Review | January 27 - February 2, 2014

12 CITY

Slicing and dicing a cooking career Kevin Hill, corporate head chef at City Grill Group, sat down with Business Review to reveal the challenges of putting together the menu for one of Bucharest’s best known restaurant chains, how he’s getting to grips with local cuisine and the chain’s efforts to dish up the next generation of chefs.

CV Kevin Hill July 2013-present: corporate head chef, City Grill Group April 2013-July 2013: group executive chef, Lussmanns Fish & Grill 2011-February 2013: group catering manager, Brook Hotels (a 21-hotel group comprising grade II-listed three- and four-star properties) 2007-2011: group executive chef, Hammersmith group brands (a division of Marstons Inns & Taverns encompassing Pitcher and Piano, Bluu, Que Pasa, and Landmark Pubs) 2005-2007: group executive chef at Spice Inns gastro pubs for Hertfordshire & surrounding districts

∫ OANA VASILIU How did you find out about the position available as corporate head chef for City Grill Group?

Last summer, I was driving along the M11 motorway in Great Britain, to the restaurant I was working at that time, Lussmanns Fish & Grill, when I received an hour and a half long phone call from Daniel Mischie, the COO of City Grill Group. A few days later, I was having a face to face conversation with him here in Bucharest and after a complete tour of the restaurants and rounds of discussions, I took the job.

What does a corporate head chef do?

First and foremost, a head chef should inspire the team, to make them want a

Photo: Mihai Constantineanu

With background including military studies, he served on the Royal Navy and the Royal Australian Air Force between 1976 and 1990. After leaving the military, he started working as a chef in Adelaide, Australia, until 2002, when he returned to Europe. career, not only a job. Secondly, everything that goes out of the kitchen is the responsibility of the chef; therefore, it is essential for the person with this job to be able to maintain complete control of the kitchen at all times and to command the respect of his kitchen staff. This is why the “students” of the cooking academy that I am running here have on their arm the Chef’s Academy logo and the word “respect”.

Also, I am charged with maximizing the productivity of the kitchen staff, from ingredients to personnel.

What is the Chef’s Academy and how does it work?

The Chef’s Academy is a six-month training program from Monday to Thursday, three hours per day, where the students learn to develop both

their cooking and management skills.

The academy pilot program has been running since autumn and the first five students are about to become real chefs. In my opinion, being a chef requires management, time and cost efficiency skills, but most importantly the capacity to share what you know.

Furthermore, you must think outside the box and know the secrets of other cultures around the world – this is why an important chapter of our cooking academy is the so-called Eclectic Week, when students learn about international dishes. All the participants are City Grill employees with different job positions and the training program is fully-booked for the next two sessions.

On February 27, all of the students will graduate to officially become head chefs, and will pass their knowledge

onto the next generation of students.

Until then, everyone can taste what they are doing in the academy, as the new City Grill menu is cooked under their supervision.

The group serves mostly traditional Romanian food. Was it difficult to adapt to the local cuisine?

Romanian cuisine is similar to Polish food, especially when it comes to meat preparation, and I am used to that food from working with lots of Polish people in Great Britain. However, I’m here to upgrade the brand, not particularly the food. For example, I haven’t even found out how all the dishes from our menus are made. Also, this adaptation should come in time, because I have to learn the specifics of Romanian flavors and for this to happen, I must travel.

www.business-review.eu Business Review | January 27 - February 2, 2014

City Grill in numbers 900 employees EUR 20 million turnover in 2012 15 locations under the Caru’cu bere, Hanu’ Berarilor Interbelic, City Grill, City Café and Trattoria Buongiorno brands So far, my trips have been from home to the office! However, I have actually “played” with some Romanian dishes: at City Grill Covaci, you can taste a different polenta, which I created.

Also, I’ve put on the menu a Chit Chat appetizer, which consists of lemon hummus, pesto and roasted red pepper dips, crudités, pickled Turkish chili peppers and capers, created

CITY 13

mostly for women who come to our restaurant for a glass of wine with a female friend. The sticky toffee pudding served with caramel sauce and a scoop of vanilla ice cream is also my suggestion.

How often do the menus change at each of the City Grill Group restaurants?

Every season has its particular menu, which is largely discussed in advance with the board and the supplier manager. Also, for weddings, banquets, private dinners and New Year’s Eve parties, the menu is being rebranded, in a bid to reflect the current dining trends and styles, such as the organic approach that we are implementing in City Grill restaurants. oana.vasiliu@business-review.ro

DON’T MISS

CONTEMPORARY NORWEGIAN ARCHITECTURE #7

Photo© Robert Sannes

Architect Snohetta designed Tubaloon for Kongsberg Jazz Festival

The National Museum of Contemporary Art Open until March 22 The exhibition, which has been touring the world since 2011, presents the best works of Norwegian architects from the last five years, documenting, summarizing and identifying trends, as much as possible, and highlighting the Norwegian style. The exhibition is a multimedia one, including photos, videos and mock-ups.

A Norwegian architectural trend has been established, and this selection presents a wide range of achievements, fromsmall homes and houses, to public buildings, complex constructions, and urban infrastructure and planning.

Through various means of presentation and new media, the exhibition paints a complex picture of the latest architecture completed by Norwegians in their own country and abroad.

The selection features over 30 projects, grouped in various ways – new constructions and renovations, interventions, cultural and educational areas, leisure and public areas, tourist routes, passive houses and so on.

The audience is invited to contribute to the installation, by way of playful yellow floral elements, with which one can leave markers to indicate favorite projects, by attaching them to the displays. oana.vasiliu@business-review.ro

www.business-review.eu Business Review | January 27 - February 2, 2014

14 HUMAN RESOURCES

WHO’S NEWS

BR welcomes information for Who’s News. Submissions may be edited for length and clarity.

Get in touch at simona.bazavan@business-review.ro

Violeta Luca

the Academy of Economic Studies in Bucharest.

will be the new vice-president and executive director of online retailer eMag. She will be part of the company’s management board and lead commercial activities such as acquisitions, sales, marketplace, logistics, showrooms and category management. Luca will stay on as president of the Flanco Retail management board.

She joined the Flanco management in August 2011 as marketing director. Previously, she had worked for eight years at Whirlpool Romania, where she was appointed commercial director in June 2007. Luca, who has 13 years of experience in the electro IT field, graduated from

Dragos Sirbu

currently product management director at Flanco Retail, will become the new CEO of the IT&C retailer. With a 15-year background in electro-IT retail, he worked his way up the ladder from sales consultant to store manager, retail director and director of acquisitions. In 2012, he joined Flanco as sales director and in February 2013, he took over the product management department. Sirbu graduated from the Finance, Insurance, Banking and Stock Exchange Faculty at the Academy of Economic Studies in Bucharest.

Valentin Mircea

has returned to the legal business as senior partner of law firm Mircea & Asociatii, after working at the Competition Council for five years. His experience in business law spans over 15 years. Aside from competition law, he is specialized in telecom and media law, along with the energy, retail and pharma practices. Mircea holds a PhD in competition law and has graduated from courses at the Sorbonne University.

Radu Tufescu

has been appointed senior associate in the competition team of law firm Mircea & Asociatii. He previously spent six years at law firm NNDKP

Botched crash response: minister resigns, PM sacks state secretary

Radu Stroe, the Romanian minister of internal affairs, resigned last Thursday amid public pressure following the authorities’ poor management of rescue operations after an airplane

carrying medical staff force-landed in western Romania. It took more than six hours for rescue teams to locate the actual site of the crash and reach the plane’s seven passengers, two of whom

FOUNDING EDITOR Bill Avery PUBLISHER Anca Ionita EDITOR-IN-CHIEF Simona Fodor JOURNALISTS Otilia Haraga - senior journalist, Simona Bazavan, Ovidiu Posirca, Oana Vasiliu COPY EDITOR Debbie Stowe PHOTO EDITOR: Mihai Constantineanu

ISSN No. 1453 - 729X

LAYOUT Beatrice Gheorghiu ART DIRECTOR Alexandru Oriean

and prior to this worked at the Competition Council for three years. He pursued postgraduate degrees at King’s College in London in European competition law and economic theories applied in the competition field.

Mirela Raicu

has been appointed manager of the corporate office division of ESOP Consulting / CORFAC International.

A founding partner of ESOP Consulting, she has more than 12 years of professional experience on the local office market. Over the years she has brokered numerous transactions, some for surfaces larger than 85,000 sqm. Before this appointment, Raicu was involved in consulting and had management responsibilities within the firm’s marketing and development department.

died. The handling of the rescue operation was strongly criticized by many including PM Victor Ponta, who admitted it was “a failure” and that public indignation was justified.

Stroe had earlier responded to questions about his position by saying that he did not believe he would be replaced and had no plans to step down.

His announcement came after Catalin Chiper, state secretary within the same ministry, was dismissed by Ponta. Others involved in the case also tendered their resignations in the wake of the botched emergency response.

Aleodor Francu, general director of the Romanian Air Traffic Services Administration (ROMATSA), and Bogdan Donciu, the company’s operations director, resigned shortly afterwards.

An initial governmental report on the

incident found ROMATSA to be the main party responsible for the delay suffered by the rescue operation. The PM had previously called for Francu to be replaced, along with Marcel Opris, head of the Special Telecommunications Service (STS).

Ion Burlui, head of the General Inspectorate for Emergency Situations (IGSU), also resigned in the wake of the disaster.

Chiper, a member of the National Liberal Party since 2005 and a former parliamentary counsel, was responsible for emergency situations within the Ministry of Internal Affaires, said Ponta.

The BN2 aircraft, which was carrying seven passengers, force-landed last Monday in an unpopulated area in the Apuseni Mountains, western Romania, due to unfavorable weather conditions, according to preliminary data. Pilot Adrian Iovan was found dead and another passenger, medical student Aurelia Ion, died on the way to hospital. The plane was carrying medical staff from Bucharest to Oradea to collect a transplant liver.

EXECUTIVE DIRECTOR George Moise SALES & EVENTS DIRECTOR Oana Molodoi SALES & EVENTS Sales managers: Ana-Maria Nedelcu, Oana Albu, Raluca Comanescu Sales executives: Ana Maria Andrei MARKETING Ana-Maria Stanca, Catalina Costiuc, Iulia Mizgan PRODUCTION Dan Mitroi DISTRIBUTION Eugen Musat

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