OREŠKOVIĆ ON BUDGET Steps concerning the budget will be entrepreneur-friendly
BUSINESS RESULTS 2015 was record-breaking for some Croatian companies
PAINT AND VARNISHES Extremely high product quality and good sales network
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PAGES 4-6
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SUPPORTED BY THE CROATIAN CHAMBER OF ECONOMY
www.privredni.hr
PVinternational C R O A T I A N
B U S I N E S S
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F I N A N C E
M O N T H L Y
March 2016, Year IX, No 256
MEASURES TO RESTRAIN EXCESSIVE DEFICITS
EUROPEAN COMMISSION: CROATIA HAS ACHIEVED ONLY LIMITED PROGRESS
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roatia has thus far achieved only limited progress in the implementation of measures intended to restrain excessive deficits and public debt, according to a report provided by the European Commission at the end of February. Valdis Dombrovskis, Vice-President of the European Commission, pointed out the same fact during a meeting with the Croatian Prime Minister, Tihomir Orešković, and other government ministers in Zagreb on 26th February 2016.
CROATIA ACHIEVED SUBSTANTIAL PROGRESS ONLY REGARDING THE REGULATIONS ON PRE-BANKRUPTCY SETTLEMENT AGREEMENTS AND BANKRUPTCY PROCEEDINGS Following an analysis of the economic challenges in EU member states, the European Commission assessed that in 2015 Croatia achieved substantial progress only regarding the regulations on prebankruptcy settlement agreements and bankruptcy proceedings. “The situation is
deeply concerning and we have lost four years”, pointed out Prime Minister Orešković following the meeting, during which a draft budget and reform plan were presented to the European Commission. “We have been encouraged by the meeting and are aware of the fact that the new government is striving to address the problems. We may express our satisfaction with the announcement of the fact that in 2016 the budget deficit will drop below 3% of GDP”, noted Dombrovskis. The European Commission is still recommending that Croatia needs to introduce a property tax and improve expenditure control, both at state and local government levels. It voiced criticism that proposals on comprehensive public administration reform have not been tabled thus far. Education and social welfare systems are currently still faced with structural weaknesses.
STRATEGY AND CLEAR INITIATIVES A strategy for public debt management and clear moves and initiatives aiming to minimise debt and reduce it to acceptable levels over a reasonable period of time are imperative. Moreover, early retirement incentive plans and more effective costmanagement in healthcare are equally fundamental. European Commission analysts noted that the previous government had anno-
unced it was to conduct an audit of budget expenditure. Nevertheless, audit findings have not been published nor presented to Parliament as yet.
In addition to the rationalisation of the state agency system, the European Commission also demands the strengthening of operational transparency within state-owned companies, primarily concerning the appointment of management boards and supervisory boards. In addition to encouraging a reduction in parafiscal taxes, the European Commission regularly points out the requirement to increase effectiveness within the judicial system, with particular emphasis on commercial courts. Expressing satisfaction with the introduction of a personal bankruptcy scheme, the European Commission also stressed the negative effects of loan conversion with a currency clause in Swiss francs. (I.V.)
TURNING POINT BUDGET CONFERENCE
OREŠKOVIĆ: STRONG MOVES TO REDUCE PUBLIC DEBT A focus on healthy business foundations giving them wide open doors, yet focusing on the interests of trade unions, but stressing that a stable tax system and business framework are imperatives, noted the Croatian Prime Minister by Igor Vukić
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he government steps concerning the budget and the economy will certainly be entrepreneur-friendly. The tax system and business framework will be stable, since this is what investors primarily expect, emphasised the Prime Minister, Tihomir Orešković, during the Turning Point Budget Conference, jointly organised by the Croatian Chamber of Economy and Europa Press Holding, on 23rd February 2016. The Conference provided an opportunity to present the basic principles for the creation of both the budget and government reform plan schemes. The Prime Minister Orešković decided to enliven the discussion on the severity of the 2 | PVinternational | March 2016 | No 256
problems the government is about to face with some humour referring to a Croatian impersonator and entertainer whilst simultaneously making fun of his own knowledge of Croatian.
THE ESTABLISHMENT OF A SPECIAL FUND OF €500 MILLION INTENDED FOR LOANS AND INCENTIVES FOR SMES
A VIGOROUS STEP TO SLASH PUBLIC DEBT Linguistic finesses should not represent an obstacle to making the vigorous steps necessary to slash public debt. Orešković stated that the negotiations with pension funds concerning their investment in motorways were progressing well. Loan liabilities of €4.5 billion are an excessive burden to public finances. Orešković believes a win-win solution can be developed – funds currently available exceed €9.7 billion. Investment in motorways will decrease the pressure towards foreign debtors, whilst simultaneously pension funds, or future pensioners, are likely to generate profits from this investment that will exceed the profitability resulting
CROATIAN BUSINESS & FINANCE MONTHLY
LUKA BURILOVIĆ, PRESIDENT OF THE CROATIAN CHAMBER OF ECONOMY
Slashing labour tax and reducing the burden on entrepreneurs The costs of work need to be reduced through lower mandatory contributions and reduced taxation, as the burden on entrepreneurs is currently overly excessive, highlighted the President of the Croatian Chamber of Economy, Luka Burilović, during a discussion at the Turning Point Budget Conference. “The subsequent decrease in budget revenue could be compensated by more effective taxation, through a reduction in tax evasion and a more restrictive approach towards tax exemptions and tax relief”, he added. A reduced burden on work taxation would gradually result in more rapid em-
from investment into other securities. Moreover, accelerated privatisation of state property will be a further measure intended to alleviate pressure on public debt. The Prime Minister stated that the Office for State Property Management pointed out there are 3,500 real estate properties, flats and offices considered as ‘idle capital’. In addition, there is also a large amount of state owned land that could be used for investment in tourism and industry. According to an ambitious plan concerning the sale of state property, some €500 million could be generated over one year. Nevertheless, during the discussion, trade unionist Mladen Novosel, President of UATUC, warned the ministers to be particularly cautious in their announcements of instant sales of state property. Novosel has been a member of administrative councils of state bodies involved in property management for several years. “During the last four years the value of state property sold was €65.8 million. It took four years and we are currently talking about one year and about euros. One encounters a huge array of problems when selling the smallest fragment of state property”, stressed Novosel. Consequently, Orešković will primarily focus on addressing the issue of bureaucracy and complex regulations that significantly slow business activity. Obstacles are frequently encountered in the implementation of laws at municipal
Sanja Mađarević-Šujster, Zdravko Marić, Boris Vujčić and Luka Burilović
ployment. “The economically active population of Croatia currently stands at 1.3 million out of a total of 4.3 million
level, yet Orešković has ample experience in that field, having worked as a manager and head of investment in Pliva, the largest pharmaceutical company in Croatia, and part of the Teva Group.
MUCH UNEXPLOITED LAND Considering the huge number of small and medium-sized companies within the Croatian economy, the Prime Minister has prepared a special incentive package scheme for SME’s: the establishment of a special fund worth €500 million in-
THE ACCELERATED PRIVATISATION OF STATE PROPERTY WILL BE RESORTED TO, AIMING TO REDUCE PRESSURE OF PUBLIC DEBT tended for loans and incentives for their use. During his meeting with the banks, Orešković found that companies submitting a comprehensive documentation as a loan application are normally granted loans within a period ranging between two to three weeks. Nevertheless, there is
inhabitants. According to estimates, only one quarter of those employed work in the real sector. Hence, it is evident that the burden on them is excessive”, pointed out Burilović. “Croatia ranks top amongst EU member states regarding the allocation of budget resources for labour costs, material expenses and subsidies. Interest rates account for an horrendous 8.6% of budget expenditure, and a significant turning point would be made upon reducing them. Hence, we must finally stop spending what we have not earned, since we have indebted both our children and our grandchildren”, noted Burilović.
a large number of inadequately prepared companies applying for loans and they normally need to wait for six months or even longer to gain loan approval. As a result, business support centres intended to address this issue will be established in Osijek, Zagreb and Rijeka. They will provide comprehensive support for entrepreneurs with quality ideas. Around €200 million required for the fund intended for support to SME’s will be provided through the EU, around €200 million by the Croatian Bank for Reconstruction and Development and €100 million from other banking and financial sources. Orešković believes that the huge agricultural potential may also be exploited within a relatively short time period. There is a large amount of unused land and production is frequently ineffective. In Canada, agriculturalists frequently form clusters in order to more effectively exploit and use the equipment they own. The state could also provide some revenue through infrastructure projects, yet Orešković showed more caution in tackling this issue: the investment into the terminal for Liquified Natural Gas on the island of Krk will be implemented only following a detailed analysis of clients and suppliers of gas. Basically, business activity will be based on healthy foundations, with doors wide open for them, and with special focus on the interests of trade unions, emphasised Orešković. March 2016 | No 256 | PVinternational | 3
CROATIAN COMPANY BUSINESS RESULTS
2015 WAS RECORD-BRE SOME, UNSATISFACTOR
Financial reports of the leading Croatian companies for 2015 generally show be East countries have had a significant impact on the business activity of INA, the shows that export-oriented companies can still be satisfied by Ilijana Grgić INA GROUP: NETT PROFIT SLUMPED BY 83%
In 2015, sales revenue of the INA Group stood at €2.48 billion, 21% down over 2014, whilst its nett profit, excluding nonrecurring items, plunged by 83%, to €7.63 million. “The additional impairment to corporate property in Syria, which significantly affected the final results, was both necessary and inevitable, due to political uncertainty and also concerning the safety issues there. Nevertheless, it is important to highlight that it was solely an accounting adjustment without any significant impact on actual finances”, was the commentary provided by INA sources.
HT: REVENUE OF €0.9 BILLION In 2015, Hrvatski Telekom generated revenue of €0.91 billion, just 0.2% up over 2014 when a drop of 1.9% was recorded.
Nett profit in 2015 came in at €121.7 million. “2015 was certainly a successful year for us, during which we have stabilised all the financial indicators and laid the foundations for further growth and development of our business”, noted Davor Tomašković, President of the Management Board of Hrvatski Telekom.
ATLANTIC GROUP: A SIGNIFICANT INCREASE BOTH IN REVENUE AND NETT PROFIT
Sales revenue generated by Atlantic Group in 2015 was €0.71 billion, a 5.6% growth in relation to 2014. Earnings before interest and taxes (EBIT) were €53.15 million and dropped by 8.3%, primarily as a result of rising costs of raw materials and an unfavourable exchange rate, but after non-controlling interests of minority shareholders, nett profit totalled HRK242.3€31.89 million showing a 21.1% growth compared with 2014.
PODRAVKA: RECORDBREAKING NETT PROFIT Sales revenue for Podravka Group in 2015 were 7.8% up, exceeding €0.49
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billion. Record-breaking nett profit of €52.3 million were generated, showing significant growth compared with 2014, which showed nett profit of €12.7 million. Record nett profit growth was primarily due to the positive effects of the acquisi-
tion of the Ljubljana-based company Žito, as well as tax revenue linked with the incentives granted for the construction of new Belupo factories. “The acquisition of Žito Ljubljana was a significant acquisition for Podravka, which will result in our reaching the long anticipated threshold of €0.6 billion in revenue and position Podravka at the top amongst the most successful food processing companies in the Adria region”, stated Zvonimir Mršić, President of the Management Board of Podravka.
ERICSSON NIKOLA TESLA: NETT PROFITS GROWTH Sales revenue generated by Ericsson Nikola Tesla in 2015 reached €0.18 billion, a 3.8% rise over the previous year, whilst nett profit was 4.6% up, reaching €12.01 million.“Business results in 2015 show a continuity of stable business activity. A significant increase in revenue was achieved as a result of activity on the Ericsson market, neutra-
CROATIAN BUSINESS & FINANCE MONTHLY
EAKING FOR RY FOR OTHERS
etter results than those for 2014. Lower oil prices and uncertainties in Middle e largest Croatian oil company. A straightforward analysis of business results TEHNIKA: PROFITS HALVED
SAPONIA: REVENUE UP ALMOST 8%
Tehnika saw the end of 2015 with nett profit slightly exceeding €66,000, with profit halved compared with the previous year. Nine companies within Tehnika operating in Croatia and one in Bosnia
lising a drop in revenue on other markets”, according to Gordana Kovačević, President of Ericsson Nikola Tesla. The local market accounts for 21.5% of sales revenue, and the share of services for Ericsson is 60.2%, with 18.3% due to exports to other markets.
and Herzegovina recorded total revenue of €99.2 million in 2015, 5.9% up compared with 2014.
PETROKEMIJA: REDUCED LOSSES DALEKOVOD: A In 2015, Petrokemija generated €0.34 billion in total revenue, 14.8% up com- PROFITABLE YEAR pared with 2014 with after tax losses of €12.26 million, a considerable drop in relation to 2014 when it recorded losses of €60.9 million. Moreover, in 2015 the company produced 1.21 million tonnes of mineral fertilisers, an increase of 11.5% over 2014. 90% of the current installed capacity has been used.
In 2015, total revenue generated by Saponia was HRK753.6 million, a 7.9 growth in relation to the same period of 2014. In addition, sales revenue increased by 7.4%, to €96.96 million. Regarding sales, the share of local and international markets is almost equal.
KONČAR: A GOOD YEAR The consolidated sales of goods and services revenue for the Končar Group in 2015 were €0.4 billion, an increase of 15.1% over 2014. Profit before tax came in at €21.8 million, with after-tax profit of €19.54 million. Revenue from sales of goods and services on the local market exceeded €0.22 billion, whilst the international market generated revenue from sales of goods and services of €0.17 billion.
Earnings before interest, taxes, depreciation and amortisation (EBITDA) of the Dalekovod Group for 2015, were €15.38 million, whilst in 2014 the Group recorded losses of €8.66 million. The increase in profitability for 2015 was due to Group operational restructuring and new contracts, as a result of which profitability in 2015 soared by 32%, reaching €0.17 billion.
March 2016 | No 256 | PVinternational | 5
CROATIAN COMPANY BUSINESS RESULTS
VALAMAR RIVIERA: EXCELLENT 2015RESULTS
Consolidated operating income for Valamar Riviera in 2015 was €0.17 billion, indicating substantial growth of 18%. Moreover, the company generated an operating profit before interest and amortisation of €55.65 million, 49% over 2014. Nett profit in 2015 reached €13.86 million, double when compared with 2014. “Excellent business results in 2015 were due to the synergy of several important factors concerning the increase of operational effectiveness against the backdrop of reorganisation and restructuring, substantial investment in our portfolio and the services that have prompted vigorous growth, the acquisition of companies in Baška, and generally an extremely satisfactory tourist season, due to which sharehol-
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der value added was created through a 20% improvement in market capitalisation”, noted Željko Kukurin, President of the Management Board of Valamar Rivijera.
stabilise EBITDA at an annualised level. Moreover, Vipnet ranks first according to customer satisfaction in Croatia”, pointed out Jiří Dvorjančanský, President of the Management Board of Vipnet.
VIPNET: SLIGHTLY LOWER REVENUES
OPTIMA TELEKOM: RANKING AMONGST THE LARGEST COMPANIES
Revenue generated by the telecommunications operator, Vipnet in 2015, were €371.3 million, showing a consolidated EBITDA of €83 million. Revenue dropped by 1.8% compared with the previous year, with EBITDA 1.5% down. “Throughout 2014, Vipnet recorded a dramatic drop in EBITDA to which we responded through a transformational programme at company level. Due to the successful implementation of our initiatives, we have managed to substantially improve our commercial results and
2015 was the tenth year of operation for Optima Telekom in Croatia and from a financial point of view it was also extremely successful. Due to its earnings before interest, taxes, depreciation and amortisation before nonrecurring items standing at €14 million, 2015 was the first year in which Optima ranked amongst the largest companies in Croatia whose operating profit exceeds €13 million.
ANALYSIS OF 2015
GDP 1.6% UP The increase in GDP was primarily due to 11.6% growth in exports (with a 14.4% rise during the fourth quarter), whilst export of services was 8.5%
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he increase in Croatian GDP in 2015 was 1.6%, according to preliminary data recently released by the Croatian Bureau of Statistics. During the fourth quarter, real GDP was 1.9% up compared with the same period in 2014. It has to be noted that during the first quarter growth stood at 0.5%, with 1.2% in the second and 2.8% in the third quarter. The fourth quarter of seasonally adjusted GDP vis-a-vis the third quarter was 0.5% down, primarily as a result of import growth. Total imports came in at 13.6% with the import of goods at 3.5%, whilst the import of services was 4.1%. External demand at 1.1% also adversely affected the GDP level. Simultaneously, export growth of 11.6% accounted for the increase in GDP level, with the export of goods rising 14.4% during the fourth quarter, whilst services increased by 8.5%. Domestic demand also had a positive impact. The most significant positive impact on economic activities was due to an increase in household final consumption expenditure (2.4%). Gross investment into fixed capital showed high annual growth of 3.7%. In addition to GDP growth during the fourth quarter, it is important to point out a threemonth-growth of gross value added (GVA). Real growth of 1.6% was achieved in relation to the fourth quarter of 2014. The processing industry exerted the greatest positive impact, whilst the construction sector is currently still having a negative impact.
IN LINE WITH EXPECTATIONS As pointed out by the Croatian Chamber of Economy, GDP results for the fourth quarter were in line with expectations. Nevertheless, considering the results for the whole year, it may be concluded that growth achieved greatly exceeded the previous estimates. Irrespective of pessimistic estimates, following six consecutive years of downward trends in GDP, 2015 showed a slight recovery in domestic demand, primarily in personal consumption and investment in fixed capital, as well as a 9.3% growth in exports of goods and services. Moreover, as pointed out by the Croatian Chamber of Economy, 2015 showed the highest level of foreign currency revenue from tourism on record, as
GROSS INVESTMENT IN FIXED CAPITAL SAW THE HIGHEST ANNUAL RISE OF 3.7% well as the highest value on record of exports of goods at around €1.51 billion. Hence, the impact of the total increase in exports of goods and services on GDP growth was around three and a half times higher compared with the impact of total increase in domestic demand. Nevertheless, the achieved growth rate of 1.6% was slightly down compared with average growth at EU level, at 1.9%. Consequently, the downward trend in relation to average development level EU-wide continued. Compared with other member states, Croatia was in a much better position in relation to preliminary estimates, and growth rates recorded in ten member states were inferior compared with that recorded in Croatia. “According to our estimates, we do not expect economic growth in 2016 to increase in dynamics compared with the growth achieved in 2015” indicated the conclusion reached in the report provided by the Croatian Chamber of Economy. (I.V.)
11.6% export growth
2.4% increase in household expenditure
March 2016 | No 256 | PVinternational | 7
INTERVIEW PETAR ĆORLUKA, owner and executive manager of Violeta and
We have also penetrated the Russian market. Actually, a supermarket chain in Moscow, which had so far accepted only European and Turkish brands, has chosen us. We plan to place around €10 million worth of goods a year in this chain, Petar Ćorluka says
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Prodex
VIOLETA WAS CREATED TO LAST We are new and interesting. Our customers want to try us, and when they do, they know how good we are. It is certain we will not stop here. We will continue to invest and employ young people by Jozo Vrdoljak vrdoljak@privredni.hr
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ioleta is one of those rare new brands created in the past three decades in the region. Company products are hygiene paper premium products, detergents and diapers. They have started to take a greater share of the regional market, becoming equal competitors with other global brands. Violeta brand was created in 2002, to become one of today’s best known regional brands. The Violeta Group owns state-of-the-art production lines in Croatia as well as Bosnia and Herzegovina. It currently employs around 950 workers and has 14 offices in Bosnia and Herzegovina and Slovenia. In addition to Violeta, Petar Ćorluka is owner and manager of Prodex with two shopping centres in Tomislavgrad and Gorica. Ćorluka is also the owner of a retirement home Vita as well as a kindergarten managed under the Montessori programme. He also owns a five-star hotel in Sarajevo. We talked to Petar Ćorluka about business activities of his companies, market conditions and his future plans.
You started in trade. What made you decide to move into production? I started in 1990, when we developed retail through Prodex and opened supermarkets and represented a series of known food products. I started thinking about production and realised we could produce some products more cost-effectively instead of importing them. We assessed everything and thought
around
950
workers and 14 offices in Bosnia and Herzegovina, Croatia and Slovenia for the Violeta Group
March 2016 | No 256 | PVinternational | 9
INTERVIEW a great deal before venturing into the production of toilet paper, followed by paper handkerchiefs, wet wipes, diapers and most recently detergents and softeners. We have kept Prodex, and it now has two shopping centres. Since many are active in trade, and competition is tough in this segment, I am pleased to say we turned to production. We have three factories, two of which are in Grude and one in Sveta Helena near Zagreb.
Is it more difficult to produce or trade? Production is more difficult. This is why there are not many companies which focus on creating a new brand and its development. Production creates a new brand, habit and new value. If quality is the best, your customers will remain loyal. We really invest a lot in our quality and improvements, working continu-
I STARTED THINKING ABOUT PRODUCTION WHEN I REALISED WE COULD PRODUCE CERTAIN PRODUCTS MORE COST-EFFECTIVELY INSTEAD OF IMPORTING THEM ously on other improvements. Our customers recognise this since we offer more than others. We offer constant improvements, innovations and the highest quality. The share of trade in our business stands around 10%.
What is the market share in other coun-
around million €
120
turnover in 2015
tries of the region? Paper towels hold our highest share. I think our regional share here is around 30%. In Bosnia and Herzegovina, it is 50%. In Croatia and Slovenia, it is around 30%, and we are developing on other markets also. In this sector, we are regional leaders. Concerning paper handkerchiefs, we are leaders in Bosnia and Herzegovina and Croatia, and are second in Slovenia. We are second concerning diapers. Our goal is to become leader, second or third. A product, which does not come third in terms of market share in these countries, is a product we have stopped producing. Our share has recently been growing in Slovenia and Hungary. We have also penetrated the Russian market. Actually, a supermarket chain in Moscow, which had so far accepted only European and Turkish brands, has chosen only us. We plan to place around €10 million of goods a year in this chain. Moreo-
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ver, this chain sells only premium brands.
You opened a state-of-the-art factory last summer. What do you produce there and what are your plans? This investment was worth €20 million and we financed it ourselves. It is equipped with state-of-the-art machinery, including a Japanese machine for producing diapers – the only one in Europe. The machine is robotic, and it is also the latest technological hit. We also produce detergents and softeners in this new plant. We have a research centre and a laboratory. In our other production area, we produce sanitary pads, toilet paper, paper handkerchiefs, towels, etc. We invested €12 million in production, and we are just about to finish an investment project worth another €5 million which will expand our capacity by 8,000 m2. We produce toilet paper and kitchen towels in Sveta Helena. In Croatia we employ 120 workers. How do you cope with world known brands? We respect and acknowledge them, but we also know we have certain advantages. Our technology is state-of-the-art, and we employ young trained people whom we have trained from the start. On the other hand, we do not carry the baggage of other famous brands. Famous brands have a heritage, which is a load in itself. Furthermore, we are careful about our expenditure, so we may invest in our quality more than our competition. What is Violeta’s turnover? Our last year turnover totalled around €120 million. We are in a recession, so general spending is stagnating or decreasing. Then there is competition. However, we have managed to keep our annual growth at a rate of 10%
IT’S NOT OUR HABIT TO HIRE PEOPLE WHO ACQUIRED THEIR WORKING HABITS IN OTHER COMPANIES - 15%. We try to remain rational and economical, keeping our debts to a minimum. We do not take out huge loans, and we invest more of our funds, even though banking loans are now favourable.
HOW TO CREATE A BRAND
Luck, instinct and courage, but only in the beginning Is it difficult to create a brand? You have to set realistic goals and take one step at a time. It is certain you have to have some luck at the beginning when you lack experience. We introduce one product at a time and invest in our image. In the region, we donate €1 million of diapers each year to maternity wards. We were the first to respond to calls for aid when the floods struck, and we donated €0.5 million. We participate in humanitarian events. Our price/quality ratio is excellent and we take one step at a time. We value word-of-mouth feedback and it is positive. If people would know how many problems they would encounter when creating a brand, they would never try to create one. You are carried by enthusiasm and will in the beginning, but you lack experience. This means you depend mainly on luck. Once you position yourself, forget about luck and cou-
Do you plan any takeovers or mergers? We are not that kind of a company. We prefer developing something from zero, and according to our rules. It is difficult to fix something. If you are hard-working and dedicated, it is much easier to create something from a low base. If you position this kind of product right, it could last a long time. My goal is that Violeta lasts a long time. It is difficult to manage people you have not trained yourself. This is why Violeta mainly accepts interns which it provides with training locally or globally. We do not hire people who acquired their training in other companies. Could you compare markets in countries in the region? In my opinion the Slovenian market is the most organised and easiest to work with. It is difficult to work in Croatia due to the illiquidity issues of certain companies. Our production is based in Croatia, but strong competition from other brands comes from a large number of supermarket chains. We have been working the longest in Bosnia and Herzegovina. Our share is the highest there, and in most cases we are our buyers’ number one supplier. We are pleased that our share of the Hungarian market has started to increase. Do you plan on penetrating other sectors or bigger markets? What we have, we try to keep stable and effective as well as to ensure it will last a longer period of time. We monitor other markets, and if we assess we can be competitive in some
rage. You have to rely on know-how and innovation. On a chaotic and anarchic market, like it has been for the past ten years, only the brave succeeded, and now only know-how, order and planning as well as experience prevails. Nothing is left to chance anymore. Everything must be monitored and analysed.
of them, we will definitely expand into them. This mainly refers to expanding our product line if we have a competitive advantage over others. We are new and interesting. Customers want to try us, and when they do, they become aware of our high quality. We will not stop
PAPER TOWELS HOLD THE LARGEST MARKET SHARE, AND WE ARE LEADERS IN CROATIA AS WELL AS BOSNIA AND HERZEGOVINA FOR PAPER HANDKERCHIEFS here. We will continue to invest and employ young people.
Do you have problems related to your workforce? Our workforce is highly skilled. Our young people learn quickly and they are dedicated. Japanese engineers who assembled our new machine and trained our workers, said they had never seen workers like ours. I have never regretted starting a business in the place where I was born and which is small. The key to everything is investing in training. This is my personal goal. What I value most in my colleagues is their dedication to work, and if they are hardworking and talented, there is no limit for them.
10 – 15% company’s annual growth
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RECENT CHAMBERS OF ECONOMY, SOUTH EAST EUROPE, INVESTMENT FO
FOR A BETTER AND A SAFER FUTURE Internationalisation of business and joint appearances on third markets are imperative for economic growth in South East Europe. Opportunities for co-operation in bringing together the regional economies and the implementation of strategic projects were presented during the Investment Forum
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he markets of South East Europe countries account for 6.5% of the European market and hence there is a need to focus on the internationalisation of business and joint appearances in third markets, as pointed out during the meeting of Presidents of Chambers of Economy at the Chambers of Economy South East Europe Investment Forum held at the Croatian Chamber of Economy. The Chambers of Economy Investment Forum is the ideal platform for cooperation, aiming to bring together our economies and ensure the implementation of strategic infrastructure projects, 12 | PVinternational | March 2016 | No 256
pointed out Luka Burilović, President of the Croatian Chamber of Economy. “Our members- entrepreneurs - need to be included in these projects in order to ensure a significantly faster rate of economic development, and eventually achieve strategic interests of both our countries and the EU. Chambers of Economy have always been aware of critical problems and have in consequence frequently assumed the role of opening doors and advocating freedom of movement of both individuals and goods in times when politics did not focus sufficiently on the economy”, stressed Burilović announcing support for the efforts of other countries
in the region concerning their accession to the European Union Presidents and Vice Presidents of all Chambers of Economy of the neighbouring countries to Croatia, and Turkey, were brought together in order to cooperate on a project aimed at transforming the EU Neighbouring Countries into a zone of stability, safety and economic development in order to provide a European future for them. Joint projects aimed at providing a better future were presented at the Conference. They are intended to improve the competitiveness of SMEs, create a more favourable entrepreneurial climate,
RUM
CROATIAN BUSINESS & FINANCE MONTHLY
PLANS ON STRENGTHENING ECONOMIC CO-OPERATION IN SOUTH EAST EUROPE
Presidents of Chambers of Economy meeting with the President of the Republic of Croatia The President of Croatia, Kolinda Grabar-Kitarović, had a meeting with the Presidents of Chambers of Economy of South East Europe participating at the Investment Forum. During their meeting the Presidents of the Chambers of Economy from Croatia, Serbia, Montenegro, Kosovo, Macedonia, Bosnia and Herzegovina and Slovenia presented the plans and opportunities for the strengthening of economic co-operation in South East Europe. They pointed out that they were working on the preparation of joint projects aimed at encouraging economic growth, and special emphasis was placed on opportunities, potential and challenges to investment and development of their economies. Furthermore, they pointed out that establishing stable political relations and institutional support provided by politics to the real economy are imperative for stronger economic co-operation. The Croatian President expressed her support for the activity of the Chambers of Economy primarily concerning the strengthening of co-operation and projects aimed at encouraging economic growth. In addition, she stated that Croatia will continue helping neighbou-
reduce unemployment, create zones of economic stability and reduce the level of youth migration throughout South East Europe. In order to achieve these objectives, the Croatian Chamber of Economy proposed five concrete projects to improve the entrepreneurial climate. These include a Digital Platform of Chambers of Economy, Internationalisation Project, through which small and medium-sized companies will be provided with help concerning their entrance to international markets, Start-up Project intended to provide financing for start-up companies and SME projects, as well as the creation of an innovation and R&D platform aimed at bringing together science and economy. The fifth project is Dual Education, intended to address the issue of harmonising education and the labour market in South East Europe.
JOINT APPEARANCE IN THIRD MARKETS Regional markets need to appear jointly in third markets as a unique product, since national economies are currently virtually non-existent and one can speak merely of competitive and uncompetitive economies, pointed out Marko Čadež, President of the Chamber of Commer-
ring countries in diverse ways, as well as through the activities of the Croatian Chamber of Economy, striving to ensure a European perspective for them.
ce and Industry of Serbia. “Small and medium-sized companies account for over 95% of Chamber members and consequently the principal focus of our discussion is on joint projects aimed at
BURILOVIĆ ANNOUNCED SUPPORT TO EFFORTS BY REGIONAL COUNTRIES REGARDING THEIR ACCESSION TO THE EUROPEAN UNION the development of services provided by Chambers of Economy that are considered fundamental for enhancing competitiveness of SME’s and strengthening the capacities during the process of European integratios, ranging from services
concerning access, to alternative sources of financing, to professional education and training”, opined Čadež. Anthony A. Gribben of the European Training Foundation (ETF) believes that new member countries are primarily promoters of new ideas in the EU. “Chambers of Economy need to comply with the principles prescribed by the Small Business Act, since that would ensure more effective training and support for small businesses and entrepreneurs showing export potential. Moreover, the creators of economic policies need to learn from current best practices within SME’s, as well as the training provided by Chambers, aiming to increase the effectiveness of further policy creation and enhance its impact on competitiveness, growth and business activity in general”. Additionally, the Small Business Act for Europe and South East Europe Centre for Entrepreneurial Learning (SEECEL) were presented at the Conference. After the plenary session, Presidents of the Chambers of Economy signed a joint letter of support for the adoption of amendments to the law on Chambers of Economy in Albania which envisages the introduction of mandatory membership. (K.S.) March 2016 | No 256 | PVinternational | 13
PAINT AND VARNISHES INDUSTRY IN CROATIA
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COMPETES WITH WORLD LEADERS The Croatian long tradition of producing paint and varnishes is marked by extremely high product quality, a wide product line and good sales network, says Renata Patarčić from the Croatian Chamber of Economy. After the recovery in construction, the potential for increasing production and use of paint and varnishes has become visible by Boris Odorčić
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tatistical data show a slight fall of production in the industry of paint and varnishes for the period 2010 - 2014. This is a consequence of the crisis which caused significant problems in the construction industry – the main user of these products. However, the exit from the crisis and a slow recovery in construction activity, has the potential to increase production and use of
TWO OF THE LARGEST PRODUCERS OF PAINT AND VARNISHES, BASED ON TOTAL REVENUE FOR 2014, ARE HEMPEL AND CHROMOS SVJETLOST paint and varnishes, as Executive Secretary to the Chemical Industry Association of the Croatian Chamber of Economy, Renata Patarčić, points out. She also added that the latest statistical data for 2015 show signs of growth in production (up 5.6% compared with 2014). In other words, 44,622 tonnes of paint and varnishes were produced in Croatia during 2014
and 47,133 tonnes in 2015. According to official data provided by Fina for 2014, a total of 46 companies were registered as paint and varnish producers with a total of 638 employees. During this same year, the industry saw total revenue of €81.64 million, which is 0.4% of total revenue of the Croatian processing industry. Croatia’s long tradition of producing paint and varnishes is marked by extremely high product quality, a wide product line and good sales network. The industry is characterised by modern and automated production, high productivity, environmental awareness and modern energy structure. It should and is, able to contribute to the environment and this is why companies invest in advanced water-based products, in innovative ideas and the promotion of production techniques, all covered as investment into research and development, says Renata Patarčić. She also added that investment in new products and improvement of existing products had resulted in many new products, and due to these products companies are able to compete with the biggest foreign paint and varnish producers on the local market. Furthermore, the quality of local products has also been recognised on demanding foreign markets.
PRODUCTION EXPORTS In 2014, the value of exported paints and varnishes totalled €411,000, mainly to neighbouring countries and in high quantities (Slovenia, Bosnia and Herzegovina, Serbia, Italy, Turkey
47,133 tonnes of paint and varnish produced in Croatia in 2015
44,622 tonnes produced in 2014
46 companies registered in Croatia as paint and varnish producers in 2014
March 2016 | No 256 | PVinternational | 15
PAINT AND VARNISHES INDUSTRY IN CROATIA
Influence of the recession still exists and the recovery will last longer than thought. Ivan Krišto, manager of Iskra Zelina
We should adjust to the EU, where everything is much simpler and where there is direction, counselling and help instead of fines – everything is in the function of development and work. Jakša Singer, member of the board and procurator of Sitolor Tvornica Boja
and Macedonia). Imports were €1.4 million, which shows how much space there is for reducing imported products with local and better ones. The largest producers of paint and varnishes based on total revenue in 2014 are Hempel (90 employees) and Chromos Svjetlost (129 employees). Hempel, which celebrated its 100th anniversary in 2015, specialises in the production of protective coatings for ships and shipbuilding and maintenance, plants and metal constructions in industry, yachts and boats and decorative coatings (paints and varnishes; paint thinners and other supplementary material). Furthermore, Chromos Svjetlost, with a 100-year tradition in producing paint, produces base (anticorrosive) and finishing paint for protecting metal and wood; paint for internal walls and concrete, paint for external walls and paint for horizontal signalisation as well as other products for construction purposes.
FEWER NEW PRODUCTS Ivan Krišto, manager of Iskra Zelina, says that the market situation for paint and varnish products is still bad. It is clear that the influence of the recession still exists and the recovery will last longer than thought. The construction sector suffered the heaviest blow – the number of new projects, the scope of work in new building has decreased. General illiquidity is especially highlighted in the construction sector and causes a severe problem. Raw materials required for producing paint and varnishes are mainly of foreign origin, and are paid for in advance or with short grace periods. However, the deadlines for collecting payment for sales are much longer. Furthermore, the purchasing power of people is not getting any stronger,
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and all this reflects on the use of paints and varnishes, Krišto explains.
ALL THOSE WHO ARE ACTIVE IN THIS AREA HAVE BIG PROBLEMS CAUSED BY UNNECESSARY ADMINISTRATION, JAKŠA SINGER OPINES Krišto claims that the preconditions for better business for all, as well as paint and varnish producers, will be created by stimulating an investment wave, increasing public purchasing power and decreasing illiquidity. The potential is hidden in better use of local resources and hiring more unemployed, especially young people who should be the generators of the economy, given the right momentum. Constant work on improving the business climate is equally important. General pessimism by the public is certainly one of the biggest reasons behind weak personal spending. Instead of spending, people opt for saving, Krišto highlights.
TEAMWORK Even though market circumstances do not support Croatian producers, Krišto says that the Croatian producers can compete with foreign players. The quality of paint and varnishes produced in Croatia does not lag behind
Paint and varnishes industry in Croatia 1990-2015 90,000
2010
2011
2012
2013
47,133
10,000
44,622
20,000
50,382
33,724
30,000
50,027
40,000
57,242
50,000
57,352
tonnes
60,000
54,230
70,000
79,916
80,000
2014
2015
0
1990
2000
2009
Source: DZS, HGK
the quality of those from other markets. The production of paint and varnishes requires teamwork performed by highly trained experts - which we have always had. For the past couple of years, the production of eco-friendly paint and varnishes has been the focus of attention. I can confirm that Croatian producers are investing great efforts to be able to respond to this challenge, Krišto highlights. He also adds that Iskra Zelina Kemijska Industrija is a production company, founded in Zagreb in 1868. It has managed to survive mainly due to its staff. For the past couple of years, the factory has been going through a renaissance. Besides being one of the biggest producers of paints and varnishes in Croatia, Iskra is also known for producing cleaning products, glue, candles and cosmetic products for cars. We direct all our investment in developing new and inno-
LOCAL PRODUCERS HAVE A MARKET SHARE OF 15%, FOREIGN COMPANIES 25%
vative products as well as in expanding our product line. Our experts work constantly on the development and improvement of production processes and formulations so that we can offer high quality products to our customers, Krišto explains. In the middle of last year, the company launched a product line intended for decorative protection of internal and external walls in Croatia, and will offer fast drying pro-
tective coatings for wood and metal surfaces during the first half of this year. In these ways, environmental awareness is nevertheless our main guideline, Krišto highlights.
HIGH LEVEL OF EU IMPORTS Jakša Singer, member of the board and procurator of Sitolor Tvornica Boja, says that those active in this sector have serious administration problems with many ministries – healthcare, environmental protection and others. Also, it is complex and time-consuming process to obtain a construction permit for a new plant since a great number of laws and regulations are intertwined, making the procedure unclear even for the institutions authorised for issuing construction permits, Singer points out. Imports of paints and varnishes from the European Union is high, Singer continues. According to our estimations local producers have a market share of 15%, Singer highlights. Local producers, owned by foreign companies (for example Hempel) have 25% and producers from ex-Yugoslavian countries and Europe, 30% each. The problem is, as Singer says, that non-EU products are not ‘regular’, that is, all the chemicals they contain have to be registered in the European Union and meet certain norms prescribed by specific provisions. This leads to unfair competition, Singer feels. He also adds that great potential for improving and expanding the industry is hidden in deregulation and simplification as well as in preventing non-regulated imports from non-European countries. Therefore, we should adjust to the EU, where everything is much simpler and where there is direction, counselling and help instead of fines – everything is in the function of development and work, Singer says.
The sector of paint and varnishes is characterised by modern and automated production, high productivity, environmental awareness and modern energy structure. Renata Patarčić, Executive Secretary to the CCE Association of Chemical Industry
March 2016 | No 256 | PVinternational | 17
ONETIUS PLATFORM LET LEARNING BEGIN
KNOWLEDGE FREE OF CHARGE ON-SCREEN Users of Onetius can individuals from whom they wish to learn in the form of lecture that suits them and depending on their enthusiasm and personal knowledge by Boris Odorčić odorcic@privredni.hr
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oon after 16th February, the Onetius web platform became available to lovers of knowledge. On this platform almost anyone may improve their life and acquire skills required for working in the field in which they feel most comfortable. Mario Novak, founder, programmer and designer of Onetius, says that around thirty testers and professors used the platform before 16 February, preparing first courses which became available on that date. This means that Onetius users can start learning about various subjects (psychology, philosophy, and many other subjects) from start-up. Novak also adds that through Onetius individuals may learn from the most creative individuals in the world and about any field they can imagine, whether it be programming, biology, chemistry, cooking, law, etc. The knowledge Onetius offers is and will always be free of charge and available to all. On the other hand, individuals can teach others about what-
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ever they are passionate about or build their own brand and live doing what they like, Novak explains.
IN THE SAME MOULD The idea for developing Onetius was created very soon after Novak came to college, when he realised that the Croatian education system was nothing but a machine, or even worse, a piece of obsolete machinery with the same approach to each individual, regardless of their potential and previously acquired knowledge. “We will change this through Onetious ideas – learning will become personalised, at a pace most suited and in a way most appropriate for the individual. Also, when they start their studies, students encounter professors who in most cases were given that job based on their previous connections to the related college and the city they work in. This does not offer many options – the professor is here and one must follow him even though his lectur-
ing methods may not suit us. Users of Onetius can select the persons they wish to learn from in the form of lectures that suit them the most and depending on their enthusiasm as well as their personal knowledge”, Novak highlights. Furthermore, Novak continues, that education offered today by classical-type educational institutions has become virtually outdated. This means that people in this education system are prepared mainly for a place in an employment agency, not in a field an individual would like to work in. Everyone has their own speciality, and we simply cannot afford a world where all people are cast in the same mould, whether it is offering lectures at only one particular time or place, demanding from them to sit behind school benches, or even offering one size fits all type of learning. People are creative and free beings. We must change the present system if we want to be on top, let alone lead the world in particular fields. By using Onetius, regardless of their financial background, state they are born in or language they speak, peo-
NOVAK CLAIMS THAT SIMILAR SOLUTIONS ARE ALMOST NONEXISTENT IN EUROPE, AND HIS ONETIUS PLATFORM IS BETTER THAN THE AMERICAN COURSERA AND UDEMY ple can learn from the most creative people in the world. They can learn when and where they wish – at home on their computers or sitting in a park using their smartphones, Novak explains. Onetius is currently available on computers, tablets and mobile phones. We did not venture into a new start-up. Rather, we created an idea each individual can relate to. We transferred this idea to the simplicity of using Onetius. Even a seven-year old or twelve-year old child can use it, even our grandmothers and grandfathers, Novak says.
PRACTICAL APPLICATION Four years of work were invested into the Onetius concept design and development. Its creation can be divided in two parts – the first being the concept solution, and the second the programming or designing part.
Novak claims that similar solutions are almost non-existent in Europe. The USA offer two ideas specialising in education: Coursera and Udemy. Coursera is focused primarily on the digitisation of knowledge by university professors. Udemy, however, has a better approach, but it does charge. “This is not the revolution we need or a revolution we have been waiting for. Education should be designed for every individual on this planet, and it should be evaluated through specific, objective parameters so that people could know what they receive. Onetius will soon be the first to present this through its unique TeacherRank algorithm. Also, we are the first who offer the practical application of knowledge acquired through each teaching on Onetius through our Meetup feature, allowing the rapid organising of meetings and local projects in the city the user lives in. For example, a user can learn from a 40-year old Japanese teaching the world about how a car functions. The user can then buy a second-hand car, upload the Japanese lectures on his tablet and work on that car together with him”, Novak highlights.
LECTURE RECYCLING Onetius is also a social network so we could communicate and exchange ideas with everyone on the platform, for example through chatting. There is also a notification system, letting people know when their favourite teacher uploads a new lesson or when something starts to happen in their city. Using Onetius we can always compare our knowledge with the rest of the world through the Performance Graph, and you can also be identified by a recruiter from global companies – if you prove to be good enough in the field you wish to work in. This allows everyone globally to be given an opportunity to obtain their dream job given the comprehensive transparency of the process, Novak highlights. Eventually it is important to point out that Onetius goal is to digitise all knowledge filtering through Croatian state colleges. This way cess each individual in Croatia could have access rove to everything they need in order to improve n or their skills related to the field they work in feswant to work in. On the other hand, profesures sors would not have to recycle their lectures year after year. They would record them once eedand upload them, refreshing them when needheir ed. This would create more space for their research work, their schedule would nott be ore crammed, allowing them to contribute more m to society. Next year and with the minimum of investment, we would secure progress in the economy and raise the standards of each, Novak concludes.
The knowledge Onetius offers is and will always be free of charge and available to anyone. On the other hand, individuals can teach others about whatever they are passionate about or build their own brand and live doing what they like. Mario Novak, founder, programmer and designer of Onetiusa
March 2016 | No 256 | PVinternational | 19
CROATIAN WINERIES CROATIAN WINES SELLING WELL INTO THE JAPANESE MARKET
DELECTATIONS FOR THE JAPANESE PALATE Annual wine consumption in Japan currently stands at around 364 million of litres, with wine imports coming primarily from European wines, providing excellent opportunities for success of Croatian wines
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our Croatian wineries – Vina Belje, PP Orahovica, Kraljevski vinogradi and Zlatan Otok – showed their offerings in mid-February at the Supermarket Trade Show, the leading trade show in Japan. Japanese customers have rated all the wines presented as excellent and hence Fuji Trading, a leading wine distributor, announced a large increase in imports of Croatian wine and the arrival of Japanese customers for a tour of Croatian wineries in September 2016. Annual wine consumption in Japan currently stands at around 364 million of litres, with wine imports coming primarily from Europe, thus providing an excellent opportunity for success of Croatian wines, whose exports there began in 2014. “Croatian wines are currently still quite unknown on the Japanese market, and are imported in small quantities. Nevertheless, they brought great interest from Japanese customers and so we are planning their participation in all important wine exhibitions and fairs in Japan, as well as independent wine tasting events three to four times each year”, announced Tsuneharu Hiyoshi, Director of Fuji Trading. “Vina Belje exports its Graševina 20 | PVinternational | March 2016 | No 256
to Japan, which, due to its freshness, is considered to be an excellent choice of wine pairing with Japanese cuisine. An extraordinary price quality ratio is imperative on demanding markets such as that of Japan, and our Graševina wine has been justifiably opted for, as shown by its continued export and excellent wine supply in selected Japanese retail centres and restaurants”, emphasised
Ljiljana Vajda-Mlinaček, Executive Director of Marketing and Tourism Sector in Belje.
CRLJENAK AND SUSHI “I can express my greatest satisfaction that Frankovka wine from PP Orahovica has been opted for as the best choice by one of the leading wine importers in Japan. The doubling of ordered quantities compared with the previous year shows that Frankovka wine has already been well-established on the Japanese market and we can anticipate a further increase in demand”, pointed out Josip Tokić from PP Orahovica. “Kraljevski vinogradi have shown their wines Pošip, Plavac Mali and Crljenak as the most important Dalmatian varieties. Our wines have a new, more modern style, expressed
through richer fruit flavours, lower alcohol by volume and higher freshness which particularly pairs with traditional Japanese cuisine. Crljenak wine and tuna have been presented as an ideal pairing also with Sushi, Tuna & Wine Festival in Zadar, as well as in restaurants in Tokyo and Osaka”, noted Zoran Pantalon, Director of the Zadar-based company Kraljevski vinogradi. Financing for the project of wine promotion in Japan was provided through the Wine Envelope, a part of the National Assistance Programme for the Wine Sector 2014/2018. It was provided and launched by Vina Belje, for whom this is the fifth approved project of wine promotion to third-country markets.