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ECONOMIC DEVELOPMENT AND ITS INFLUENCE ON BUSINESS OF INEKON GROUP, A. S. VSTŘÍCNOST KOMPLEXNOST NADNÁRODNOST AKCELERACE PROFESIONALITA Josef Hušek, Managing.

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Presentation on theme: "ECONOMIC DEVELOPMENT AND ITS INFLUENCE ON BUSINESS OF INEKON GROUP, A. S. VSTŘÍCNOST KOMPLEXNOST NADNÁRODNOST AKCELERACE PROFESIONALITA Josef Hušek, Managing."— Presentation transcript:

1 ECONOMIC DEVELOPMENT AND ITS INFLUENCE ON BUSINESS OF INEKON GROUP, A. S. VSTŘÍCNOST KOMPLEXNOST NADNÁRODNOST AKCELERACE PROFESIONALITA Josef Hušek, Managing Director and Chairman of the Board of INEKON GROUP, a.s. 22 nd May 2009 HELPFULNESS COMPLEXITY MULTINATIONALITY ACCELERATION PROFFESSIONALISM

2 INEKON GROUP – BASIC FACTS INEKON GROUP is a professional with international contacts and complex services, who is able to comply with wishes of its partners. CZECH GLOBALLY ORIENTED, COMMERCIAL - PRODUCTION HOLDING Inekon Group was established as a purely private Czech company in From the beginning commercial activities - mainly export of rail vehicles and import of raw materials for chemical industry it gradually expanded into a commercial-production holding that specialises in four main lines of business: Rail Vehicles ChemistrySoftware Programmes Tram Cars Locomotives and Carriages Permanent Ways Urban Transportation Systems Cement Plants Powert Plants Sewage Treatment Plants Car Care ProductsBussines Navigation Products for Sports Glues Fertilizers Cleaning Equipment Corporate Planning Profitability Management Strategic Projects Capital Equipment

3 INEKON GROUP – GLOBAL BUSINESS ACTIVITIES

4 IMPACT OF THE CRISIS ON SALES OF INDIVIDUAL COMMODITIES Economic crisis Reduction of consumption and demand Limited investment options Cuts of prices and margins Details and quality decide INEKON GROUP Urban rail transport and lines Railway transport and lines Energy Other fields of business Cement works export

5 Urban Rail Transport and Lines HUNGARY Tram delivery tender opened untypically in Forints instead of Euros INEKON GROUP manufactures trams of own construction. These are operated in the CR but for instance also in South America. The company also specialises in modernisation of older types and construction of lines for mass urban transport. Plunge of Forint Exchange Rate Suppliers face the risk of loss due to unexpected exchange rate differences UNITED STATES Participation in tram delivery tenders restricted by the condition of manufacture in USA Protectionism Tightening of „Buy America“ conditions should start the domestic industry, but restricts competition RUSSIA Cities suffer from reduction of tax incomes, for this reason they are forced to limit their investment expenses Investment limitation Modernisation of trams and construction of lines are often postponed „indefinitely“

6 ALBANIA Despite granted licence for operation of railways in the country we cannot commence realisation Limited lending The banking syndicate, that was supposed to provide loan coverage, require additional guarantees SERBIA A decision on realisation of railway corridor modernisation worth Euro 300 million Financial crisis Realisation of job is prevented by lack of free funds in the interbank market AZERBAIJAN A long-term intent to modernise locomotives and facilities Lower tax incomes Plunge of income side of the budget led to limitation of state loans Railway Transport INEKON GROUP is a traditional supplier of railway vehicles. Owing to Inekon, Czech locomotives are operated in Russia or Cambodia. We also ensure deliveries of spare parts to Vietnam, Turkmenistan, Uzbekistan, Syria etc.

7 Cement Works Export IRAQ Kuwait investors announced their interest to join the project of building cement works in Iraq with Euro 328 million EGYPT A contract for construction of cement works near the capital of North Sinai, Al Arish, signed last year State monetary policy The commencement of realisation is subject to making a down payment in free currency, which has been prohibited by state bodies due to building of state reserves Risk assessment However, banks recommended realisation of the investment only after the global crisis ends Cement works export belongs among the strongest lines of INEKON GROUP business. Signing of contract worth Euro 115 million in 2006 was a major breakthrough in the stagnating business connection with Vietnamese Socialistic Rep. The company, however, has also signed contracts with other countries. VIETNAM Delay of realisation progress due to necessity to ensure sufficient financial coverage of bank loans Slump in real estate prices Due to economic crisis, the investor had to ensure additional guarantees for loans to banks for down payment provision

8 Power Plants Export SOUTH AMERICA Building of new power plants and modernising of existing works in connection with long-term environmental projects INEKON GROUP realises delivery of turnkey projects in the field of energy through its subsidiary company INEKON POWER. INEKON however also offers individual parts, partial components or spare parts. THE CZECH REPUBLIC Project of biomass power plant construction in Domoradice already received the Building Permit. CHANGE OF BANKS‘ BEHAVIOUR The banks prolong the 0.5 billion CZK down payment negotiations despite the fact, that project payback period is estimated at mere 3 to 4 years. FALL IN OIL PRICES In addition to economic crisis, the realisation is complicated by natural disasters and reduced incomes of budget based on oil sales

9 Other Fields of Business MANAGERIAL INFORMATION SYSTEMS Due to lack of free funds in the market, companies postpone the purchase of corporate management information systems. Companies try to gain subsidies from the European Union. CONSUMABLE CHEMICALS The economic crisis also has its positive consequences – people focus on cheap products of medium quality. DRUCHEMA supported the customers‘ interest by innovating a number of products and by extension of the already rich portfolio. Through subsidiary company INEKON SYSTEMS, INEKON GROUP provides its own methodical and software solutions of corporate management support. Another subsidiary company – producers cooperative DRUCHEMA – is a leading Czech producer of consumable chemicals.

10 WHAT TO DO IN ORDER TO HANDLE THE ECONOMIC CRISIS 1.We diversify the portfolio of banks that we collaborate with in the process of realising individual jobs Reaction to: Behaviour of banks, limited lending, conditions of risk assessment, lack of free means in the market 2. We increase the intensity of acquisitions and respond to any enquiry in all commodities INEKON GROUP BETS ON DIVERSITY AND SWIFT REACTION Reaction to: Lower volume of enquiries and tenders, reduction of investments, protectionism

11 WHAT TO DO IN ORDER TO HANDLE THE ECONOMIC CRISIS 3.We invest in innovations and diversify the range of products and services that we tailor make for our customers Reaction to: Change of purchasing and investing behaviour INEKON GROUP BETS ON DIVERSITY AND SWIFT REACTION

12 WHAT TO DO IN ORDER TO HANDLE THE ECONOMIC CRISIS 4.To a maximum extent we use the insurances of EGAP that cover project costs up to 99% share INEKON GROUP BETS ON DIVERSITY AND SWIFT REACTION Reaction to: Tightening of conditions for provision of bid bonds and performance bonds by banks 5.We strengthen the long-term good relationships with our suppliers and business partners For almost 20 years it had not happened that INEKON GROUP would lose a business due to the fact that EGAP would not provide insurance, this even holds true in such jobs as delivery of trams to the USA or delivery of nuclear power plant equipment to Ukraine.

13 CONCLUSION Money is more expensive Products are cheaper Only the economically strong will survive Details decide more than any other time Margins are lower Production is limited The Crisis and Inekon Group? We bet on diversity of fields and spheres of business In the event that there is a decline in one activity, we are able to be successful elsewhere To our partners we offer mutually supplementing services at a high level of quality We are able to ensure financing of projects even during times of crisis We are a strong and stable partner who is able to open the door for its customers and strengthen their position in the domestic and foreign markets.

14 The situation in last months has been critical. However, we believe that owing to collaboration with EGAP and ČEB we will find ways of how to overcome all obstacles and achieve success. THANK YOU FOR YOUR ATTENTION HELPFULNESS COMPLEXITY MULTINATIONALITY ACCELERATION PROFFESSIONALISM


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