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Poland and Russia – The Biggest Players in CEE – The Opportunities, Challenges, Economies, Businesses and People ICTF International Credit Professionals Symposium, Cracow 14-16/05/2017
■ Arkadiusz Taraszkiewicz – Senior Manager RS1,
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Agenda
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Economy
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Spendings for army / defence as % of GDP (2015)
Source: Stockholm International Peace Research Institute , 2015
Which country spends more for army?
Polska 15
2.0% of GDP
Oman
16.2% of GDP
1
3.3% of GDP
USA 10 Rosja 6
5.4% of GDP
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■ Total value of GDP of CEE in 2016 estimated for
2.325, 01 bn EUR
■ Poland and Russia together constitute 70% of the
region GDP
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Russia and Poland in CEE – role and weight in the region
Share in total GDP ( value) of CEE in 2016
Share in total population ( number)) in CEE in 2016
■ Size of markets does matter!
■ Poland and Russia represent 65% of total population of
CEE ( over 347 mio people)
■ GDP per capita POL 10,9k eur, Russia 9k eur
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6 ICTF International Credit Professionals Symposium, Cracow 14 16/05/2017
Economy performance and outlook
■ In Russia oil-and-gas sector accounted for 16% of
GDP, 52% of federal budget revenues and over 70%
of total exports
■ Observed recovery in Russia ( oil prices). Consumer
demnad remain problematic
■ Currency exchange rates.
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Poland import
Trade between Poland and Russia can be considered as low, but potential is very high
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Trading with…
Russia import
Poland export
Russia export
15th 23th
22th 19th
Source: tradingeconomics.com
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■ Import from Russia to Poland is in fact
limited to oil & gas
■ Poland imports mainly semi finished
goods required for the production in
electroniic, machinery and automotive
indistries as well as finished goods
■ In Russia major import is related to core
sectors for Russia ( mining, oil, steel)
■ Embargo on food imposed by Russia
decreased to minimum polish food
export. Polish producers quicly adapted
to the new conditions increasing export
to other markets
■ Anyway, the situation in longer run can
be problematic for polish producers, as
Russia is developing own food sector to
cover domestic needs. Soon we can
expect export expansions of the
products
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Trading with….
Russia - import by category
Poland - import by category
Source: tradingeconomics.com
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Business & People
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Doing business
29th
131st 24th
40th
Source: transparency.org
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Infrastructure and logistics Russia is the biggest country in the world ( 50 times bigger then Poland)
Poland Russia
km railways 20,228 87,157
km rivers tracks 102,000
Country area km2 17,075,400
km roads ( expressways) 1,145,000 (806)
UK
16,512
3,199
243,610
394,428 (3,497) 423,997 (3,050)
3,659
322,575
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Infrastructure in capital cities – subway…
Warsaw Metro
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Business in Russia
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Business in Poland
Rosomak
AWT 100 PZL Świdnik KGHM
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People
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Abramowicz
Forbes : 3,5 bn EUR w 2016
Kulczyk Investments, Oil, Highways..
„Phoenix 2”
90m lenght Kulczyk
“Pelorus”
100m US-$ Ship’s crew: 40
Forbes: 9 bn EUR w 2015
Steel, mining
Owner of Chelsea London
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Risk assessment
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Payment practices barometer
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■ From 2010 upward trend of insolvencies. However in 2016 the number decreased by 3,8%, but it is still 15% above pre
crisis 2013.
■ Retail and wholesale trade, Construction and Commercial services – these sectors brings 70% of all insolvencies
■ Location wise the highest number of insolvencies was recorded in Amur, Kemerovo, and Volgograd regions.
■ Consumer demand is still weak ( real personal incomes are declining 9 quarters in row)
■ Credit risk – overdue credits are growing, Jan-Dec 2016 increase by 13,6% vs 2015, reaching 43bn eur ( 6,3% of all trade
credits). Highest growth recorded in Construction +37%; Paper production +15%, mining +20% sectors.
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Insolvencies - Russia
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■ There is positive trend in insolvencies observed in Poland; 807 (2014), 750 (2015) and 606 (2016).
■ However 2016 was the first year of new restructuring law. Registries show that for such solution applied 212 companies.
■ The highest number of insolvencies was recorded in Masovian, Malopolska and Zachodniopomorskie regions.
■ Almost half of all insolvencies are in Construction ( 135, drop vs 2015 by - 16%) and Retail and Wholesale trade (192,
increase vs 2015 by +13%)
■ From the legal type perspective, majority of insolvencies declared by Ltd ( Sp. z o.o.) 53% and private enterpreneurship
( PTY) 29% 19
Insolvencies - Poland
Source: Kuke, Upadłości 03/2017
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UE - regulations
Financial services Dual use goods Specialistic technologies Military goods Financing of specific banks Sanctions related to persons
Exporters Financial Institutions
Insurers
UE-Firms
Companies: Ban on export of goods and services under
sanctions Application for licence
Insurer: Monitoring of buyers’ databases Consultations with customers
Local regulations Local companies
Local sanctions
Food embargo Agri products Fruits and vegetables Food products Machinery and equipment
Companies covered by sanctions
Underwritting in Russia - sanctions
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Usually Group consists from large number of entities like ZAOs i OOOs.
Shareholders (persons) indicated in Trading Report very often are so called „nominated” sharholders.
Very often there are so called off shore companies (BVI, Bahamas, Cyprus, Delaware w US) .
Usually trade reports do not contain full picture of sharholders and grou structurue. There is only one way to get more info and reliable insight.
Visit the company
Example part of e-mail : „ attachmenets and basic explanations regarding Group results and structure of the Group”
“We can sign the financial data, but we can not reveal the identities of persons who signed it!”
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Underwritting in Russia – financial data and ownership structure
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Risk element
Example commentary of CFO
“This is what you need? We can change results if there is such necessity!”
Profits are minimized; Assets transferred to off shore companies.
No consolidated tax accounts.
Thus tax accounts not sufficient. Audited / consolidated accounts – hardly available.
Management consolidated accounts
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Underwritting in Russia – analysis of financials
31-12-XXXX 31-12-YYYY
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Moscow
St. Petersburg
Novosibirsk
Volgograd
Yekaterinburg
Kaliningrad
Chelyabinsk
Kazan
Samara
Perm
Omsk
Irkutsk
Karsnojarsk
Ulan- Ude Chita
Skovorodino
Belogorsk Kabarovsk
Vladivostok
Ust -Kurt
Tynda Konsomolsk -
on -Amur Sovetskaya Gavan
Nizhniy Novgorod
Atradius –
credit expousure
Chemical Automotive
Shipyards Wood
Air
Agriculture Steel
Electronics
2.000 km
9.000 km
Railways
Roads
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Underwritting in Russia – visiting companies
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■ In practice within one day you can reach
any company in Poland by public transport
or car.
■ Expousure of Atradius reflects
industralisation of Poland
Underwritting in Poland – visiting companies
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Underwritting in Poland – payments
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■ Action SA – top 3 IT distributor
in Poland, listed on WSE starts
restructuring procedure mid 2016
in order to protect itself against
Tax Office decisions ( return ca
80 mio PLN of VAT)
■ MGM, middle sized IT distributor
declares insolvency in 04/2017.
As the reason indicates freezing
by Tax Office 23 mio PLN VAT
return due to ongoing controls.
Company losses liquidity.
■ Reverse VAT - Implementation
of reverse VAT in construction
materials from 2017 ->
potentially negative impacy on
liquidity of subcontractors
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Belastingdienst (Dutch Tax and Customs Administration
Underwritting in Poland –VAT in focus
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Where to look for information
Info Russia Poland
Ready credit reports Spark Interfax, IGK… Bisnode, Creditreform…
Financial Data Rosstat ( Federal State Statistics Service); Federal Taxation Service, Central Bank,
KRS ( Court Registry)
Payment information n/a Paydex ( Bisnode) -
Legal data Rosstat, The Chamber of Commerce and Industry; The Bulletin of State Registration
Ceidg.pl – online check of private enterpreneurships Ems.ms.gov.pl; eKRS.pl
Debt Info / Court cases / Other related
Federal Arbitration Courts; Federal Baillifs Service
BIK
Insolvencies Rosstat COIG ( Centralny Ośrodek Informacji Gospodarczej)
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■ It is estimated that both in Russia ad Poland 20-30% of oblidged companies do not publish financial data ( penalties size
and execution of them supports such behaviour. Planned more restrictive legislation.
■ Although during last years big progress in digitalisation of databases, still not all data are easy accessible .
■ Necessity to use other sources for the risk assessment ( monitoring industies formus, blogs, using geolocations or web
sentiments ratings)
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Summary of challenges in risk analysis
Russia Poland
Financial data reliability and investigation on group structure Access to financial data
Lack of financials in registries – warning signal Politics, politics, politics
Ongoing consolidations in some sectors – analyse potential impact ( pharmaceutical, electronics, IT sectors)
Agressive actions of Tax authorities
Sanctions impact New restructuring law
Volatile RUB against USD/EUR Intensification of fraud transactions in certain sectors
Weak consumer demand Personal data protection law
Problems with financing Payment morality of polish companies
Sanctions still in place Not all securities are efficient
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If something is not possible to be done, give
it to Poles
Thank you