June 2004
Coca-Cola HBC increases investments
Irrigation in Romania receives USD 102 M
Standard & Poor’s announces rating for Rompetrol
GDP goes up 6.1% in Q1 2004
Romania’s GDP over January 1-March 31, 2004 stood at 405,354.5 billion lei, up 6.1% in real terms against the same period last year, the National Statistics Institute informs. The rise was triggered by an increase in volume of activity and consequently in the value added tax (VAT) in industry, by 6.6%, and constructions, by 7.2%, areas which contributed 35.8% to the GDP. Services contributed 207,030 bn lei to the GDP, accounting for a 5.7%-increase against Q1 2003. Overall final consumption recorded an 8.1-percent surge over January 1-March 31, 2004, as compared to the same period in 2003. The actual consumption of households went up 8.4%, while public administration consumption surged 4.1%. Gross capital formation recorded a 7.3% surge. The investment rate contingent on the gross industrial VAT stood at 18.9% in the first three months of 2004, as against 18.5% in the same period in 2003.
These results come after a well-pondered economic reform, Nastase said, adding that Romania is going into the right direction. These results are exceptional and the more remarkable since Romania is in an election year, the Prime Minister said.
(source: Romanian Business Journal)
Launched at the same time in Paris and Bucharest, DACIA LOGAN will conquer Europe
The launching ceremony at the Parliament Palace was attended by President Ion Iliescu and Premier Adrian Nastase, who unveiled the new DACIA LOGAN to a public of more than 2,000.
The 5,000-euro Dacia is the most important Romanian industrial product that will be sold both on the domestic market and abroad, as the French aim to sell 700,000 units by 2010.
The 5,000-euro Dacia will certainly prompt many of the world’s important publications to write stories’ about the event, which will do a lot for Romania in terms of international image.
“Renault’s investments in Dacia have reached 360 million euros this year, but will go up to half a billion euros by the time the retooling process is over,” Dacia vice-president Constantin Stroe declared.
The investments exceed by far the plan assumed by the French producer back in September 1999, when it bought the main stake in Dacia. Originally, Renault had scheduled to invest $219 million in the first five years. Initially slated for release in 2003, the 5,000-euro Dacia was the bet that Renault chairman Louis Schweitzer made when buying the carmaker.
However, the real situation at the Pitesti-based plant and the evolution of the Romanian automobile maker did not match Renault’s estimates, so that additional investments were needed and the launch of the new model was postponed for 2004.
The working conditions were more archaic than Schweitzer could have fathomed, there were many cases of theft from the plant and, instead of the 100,000 cars the Renault analysts were counting on, only 50,000 were made in the first year. Under the circumstances, Dacia’s financial results went from bad to worse and the management’s goals to cut losses were never fully achieved.
Whereas estimates pointed to losses of 40 million euros in 2001, their level actually amounted to 86 million euros at the end of that year. In 2002, the 56 million euros scheduled as losses eventually surged to 96 million euros, with the same value logged in 2003. In fact, 2003 was the first year when Romania’s biggest carmaker managed to achieve a significant growth in sales - 70,000 units, up 20 percent from the previous year. These positive results are almost exclusively due to the Solenza model, which was launched by Dacia last year as the new and improved version of the SupeRNova model. Solenza was also helped by the arrival of some of Renault’s traditional suppliers. Moreover, Dacia last October managed to post the first operating income since Renault’s arrival. “In the first five months of the year we have achieved 95 percent of the goals budgeted for this interval,” Stroe said. The Dacia official had estimated sales of 90,000 automobiles for this year, with the 5,000-euro model expected to sell 11,000 units.
(source: Romanian Business Journal)
Coca-Cola HBC increases investments
With an investment program of around 38 million euros slated for Romania, Coca Cola has voiced bold plans to bolster its production facilities and distribution network. One of the company’s markets, mineral and still water, has seen fierce competition of late.
“The markets for mineral and still water as well as for soft drinks have seen robust development over the past years. We hope that the trend will continue, along with the general growth in the non-alcoholic beverages sector,” said Mugurel Radulescu, public affairs and communication manager at Coca-Cola HBC Romania. The company took over the mineral water brand Dorna about two years ago and invested around 10 million euros in promotional campaigns and the distribution network.
The company also owns Poiana Negri and Izvorul Alb brands. “All mineral water springs that are used by the Coca-Cola system in Romania are located in the area around Vatra Dornei.
We have three plants in this area at Floreni, Poiana Negri and Cristalina. Investments in those plants in 2003-2004 total approximately 10 million euros. Of this amount, 6 million euros will be invested in a new PET line and building upgrades in Poiana Negri,” Radulescu added.
Most of the investments planned for this year have already taken place and are underway. In addition, about 3.5 million euros will be spent on a new injection machine and improving the buildings at the plant located in Bucharest as well as on purchasing new cars and refrigerators.
(source: Romanian Business Journal)
Irrigation in Romania receives USD 102 M
The World Bank is co-financing, together with the Romanian Government a project that was released yesterday under which the irrigation system of Romania is to receive financing worth USD 102.947 M. “This project will benefit both the Romanian farmers and the Romanian agriculture overall,” Romanian Agriculture Minister Ilie Sarbu said yesterday at the release ceremony, adding that the World Bank project opens the series of other investment projects in the same field. He also said that some 1.5 million hectares of the irrigation system that dates back to 40 years ago have been commissioned since 2001, although this was almost fully destroyed after 1989.
From the total amount budgeted for the rehabilitation and reform of the irrigation sector, USD 80 M will be provided in the shape of a 15-16 year World Bank loan on which LIBOR+0.75 percent interest will be levied, some USD 20.622 M will be contributed by the Romanian Government and USD 2.325 M by the Water Users’ Associations.
This project is thought to revolutionise the irrigation system in Romania over 500,000 hectares, said World Bank official in Romania Owaise Saadat. He added that its is very important that this project started during Romania’s preparations for accession to the European Union, as this will allow Romanian farmers better positions on the European market in 2007.
The project has four components: first and most important relates to the rehabilitation of the irrigation system, for which USD 94.1 M are budgeted. Part of this component, the main infrastructure over 100,000 hectares and 20 main pumping stations will be rehabilitated that serve 400,000 hectares.
The second component relates to institutional development, for which USD 3 M are budgeted , and comprises granting assistance needed for the functioning of the future National Land Improvement Administration of Romania. Another component is designed to commission low-energy consuming irrigation technologies, on an allocation of USD 1.1 M plus some USD 4.7 M for the total management of the project.
(source: Nine O’Clock)
Standard & Poor’s announces rating for Rompetrol
Rompetrol group was Tuesday assigned, by financial rating agency Standard&Poor’s, the “B minus” rating, with “stable” prospects, the same rating assigned to the future issue of bonds, worth EUR 150 M, an S&P release announces. “The ratings are constrained by Rompetrol’s weak financial profile, asset concentration, and aggressive financial policy,” said Standard&Poor’s credit analyst Elena Anankina.
These elements are counterbalanced by the favourable positioning, at the Black Sea, of Petromidia, the main refinery of Rompetrol, which facilitates crude supply and export operations. Also, the refinery is complex enough to process cheap Ural crude. Standard&Poor’s estimates that Rompetrol will be able to maintain an adequate financial position, as banking credit lines and liquidity reserves cover the needed short term financing.
“Rompetrol is expected to take advantage of improving conditions in Romania’s product market,” said Ms. Anankina. “Still, free cash flow generation is expected to be negative in the coming years, due to aggressive investment plans and higher interest expenses going forward, because of interest on the convertible bond,” Anankina explained.
(source: Nine O’Clock)