Poland Sector report
Sectors @ a glance
Industry performance outlook
Construction/ Const. Materials
The arrows in this overview represent the direction of change in the Atradius outlook for the industry since the previous update. No arrow will appear if there has been no change in our overall outlook.
Remains Fair In H1 of 2020, the sector was impacted by the consequences of the first lockdown (e.g. transport and supply chain issues and lack of foreign seasonal workers). Additionally, the sector has struggled with rising cases of the African Swine Fever, which has led to deteriorating prices. Agriculture value added is forecast to increase by 2% in 2021 after an estimated 1% decrease in 2020.
Remains Bleak Since H2 of 2020, a recovery in demand from main importers of car parts (Germany, Czech Republic and Spain) has positively impacted sales of Polish manufacturers, helped by their cost/price advantage. However, the demand outlook for 2021 remains uncertain. While sales of passenger cars and light commercial vehicles are expected to increase in 2021 (by 10% and 8.5% respectively), this rebound would be lower than the decline in 2020, and not return to sales levels seen in 2019. Mainly in H1of 2020, the transport subsector was hit by travel restrictions, supply chain disruptions and the economic slowdown. Bankruptcy and insolvency proceedings started to increase sharply in Q4 of 2020, mainly affecting the passenger road transport segment and smaller and highly geared businesses in the road freight transport segment. While fiscal and monetary policy support has dampened the chances of a higher increase so far, it is expected that insolvencies will increase further in 2021, following the expiry of government support measures.
Remains Fair Businesses active in the chemicals and pharmaceuticals industries generally have sufficient financial strength, good payment records and a low insolvency rate compared to other industries. In the pharmaceuticals segment, the coronavirus pandemic shifted the focus from drugs to medical supplies. Producers and wholesalers benefited from increasing health expenses, with value added estimated to have increased by about 5% in 2020. Chemicals value added is forecast to increase by more than 3% in 2021 after an estimated 0.5% decline in 2020.
Remains Poor Operating margins are very tight in this industry, with increased credit risk mainly for smaller players. Due to the economic recession in 2020 (GDP is estimated to have contracted 2.9%), businesses are additionally affected by postponement of projects and reduced order volumes. Despite the forecast economic rebound of 3.6% in 2021, construction insolvencies are expected to increase in H1 due to the negative impact of a protracted investment slowdown.
Up from Poor to Fair Private consumption of non-food consumer goods deteriorated in early 2020 due to the coronavirus impact, with many businesses temporarily closed as a result of the lockdown. However, sales rebounded strongly in H2 of 2020, especially in the household appliances and furniture subsectors. Retail value added is forecast to rebound by 4% in 2021 after an estimated 9% decrease in 2020.
Remains Fair ICT sales increased 4.9% year-on-year in the January-September 2020 period. The lockdown in early 2020 has accelerated digitisation trends in many companies and households (at least in the remote working/learning area), thus supporting ICT sales. E-commerce has boomed, helping not only software houses developing solutions, but also electronics retailers. At the same time, the impact of the pandemic and the subsequent economic repercussions on IT integration projects remains to be seen. Government stimulus measures have so far improved the short-term liquidity of electronics and ICT companies. In 2021, ICT value added is forecast to increase 6%.
Remains Fair The sector remains relatively robust. Expected financial troubles led to increased provisions, which in turn decreased profits. At the same time, government stimulus supported liquidity of businesses and consumers. However, this year increased financial troubles for businesses could lead to increasing non-performing loans and deteriorating profits.
Remains Fair Food is one of Poland’s strongest industries, accounting for a 9% share in the EU food industry. Competition in the Polish food market is high, and businesses´ profit margins are low, especially in the food retail segment. Many smaller and independent retailers are working on tiny or even negative margins. The meat production segment struggles with low margins, price pressure and the repercussions of repeated outbreaks of African Swine Fever. The number of protracted payments is generally high in the food industry, as larger businesses use their leverage against suppliers, demanding long payment terms or prolonged payments in order to improve their own cash flow. While sector value added is forecast to increase by 2.5% in 2021, food suppliers to hotels, restaurants and catering are suffering from deteriorated sales, with rising payment delays and insolvencies.
Remains Poor Orders on hand and production sharply decreased in H1 of 2020, as domestic and international demand from key buyer sectors like automotive declined. Engineering value added is estimated to have contracted by almost 13% in 2020. While a rebound is underway, major downside risks related to the ongoing spread of the pandemic persist.
Up from Poor to Fair After metal producers and traders suffered due to deteriorating demand from key buyer sectors in Q2 of 2020, there was a robust rebound in H2. Aluminium processors have shown a rather good performance so far. The 2021 performance outlook for metals is highly dependent on demand from major buyer sectors like automotive. There are downside risks, like rising energy prices and the impact of EU green climate policies. Profitability of metal producers will be under pressure, and some companies with high financial debt will still face troubles. After the expiry of government support measures, the number of insolvencies is expected to increase in Q2 of 2021.
Remains Poor Due to the comprehensive lockdown measures, many segments have suffered, especially hotels and catering, restaurants, bars, entertainment and cultural events, tourism, travel agencies and tour operators. Profits of many businesses have decreased by 90%. Despite additional fiscal support for the industry worth PLN 2 billion, it is expected that up to 30% of the businesses could not survive the pandemic crisis. Insolvencies and business closures are expected to increase sharply in 2021. Hotels and catering value added is forecast to increase 7% after an estimated 11.5% slump in 2020.
Up from Poor to Fair After a very weak steel sector performance in Q2 of 2020, there was a strong rebound in Q3 due to restocking and resumption of production by end-customers. In Q4 and into Q1 of 2021, the performance of processors, as well as steel wholesalers delivering to automotive and household equipment, was surprisingly good, helped by higher steel prices and a realignment of European supply chains away from Asia and towards Central and Eastern Europe.
Due to government stimulus measures (like the PFR Financial Shield, amounting to about EUR 22 billion), businesses received large financial support and could improve their cash position. However, it is expected that after the expiry of this support, the number of insolvencies could start to increase in 2021. Suppliers to hotels, offices, and shopping centers builders would be mainly affected. Additionally, the economic rebound still remains subject to uncertainty related to the pandemic and to timely vaccination roll-out. Other downside risks for the steel sector include worsening profitability for companies with long-term contracts due to soaring steel prices, rising energy prices and the impact of EU green climate policies.
Remains Poor Producers, wholesalers and retailers suffered from deteriorated sales due to the lockdown and lower private consumption. Textiles value added is estimated to have contracted 6% in 2020. Textile brick-and-mortar retailers’ insolvencies are expected to increase in H1 of 2021.