The long road to effectiveness

Transport and cargo industry in Romania carries some of the most important privatization assignments to the local economy and seemingly, the year comes to an end close to a bitter conclusion, that of a hard and very slow process

The only company in this industry that seems to have seen an advance is Romanian Post National Company (Posta Romana), where the consultancy group has been selected. On the other hand, the state-owned postal company started already to compete side by side with private carriers, many of them part of multinational groups. This segment saw recently a large joint-venture of two large international operators and the companies  feel the rush of market share on a very competitive market. 


Privatizations, harder than never


The largest operator on the couriers market, Romanian Post National Company, is heading towards a long-waited privatization after a consortium established by KPMG Romania and law firm Tuca Zbarcea si Asociatii has been selected in September this year to offer consultancy services in the privatization process conducted by the Ministry of Communications and Information Society (MCTI). According to the ministry, the first stage of privatization has been completed so far and a strategic investor has to be selected. The new investor at the national postal services company will own more than 20 percent share package and the operation will be done through a capital increase procedure. The state company runs over 7,000 postal offices, over 32,000 employees and its main shareholders are the Romanian state with 75 percent of shares and Proprietatea Fund, with 25 percent.


CEO for state, wretched result


As the privatization of “Posta Romana” is part of the agreement with the International Monetary Fund and European Union, another major privatization on the IMF list and expected to happen is the national air company Tarom. October came with a surprise, that of the selection of a new board for Tarom, including names as Dumitru Prunariu, Dan Pascariu, Lucian Isar, Marius Ghenea, Ciprian Ladunca, Valentin Macec. Though, the helm of the company was empty at the end of October as the would-be CEO of Romanian flag air carrier Tarom, Heinrich Vystoupil, has reportedly refused to take the post at the end of October. The naming marked an unsuccessful debut of the national program “CEO for state” agreed with IMF at one year since it started.


Another state-owned company on the privatizations list is The National Rail Freight Company “C.F.R. Marfa” S.A. The privatization procedure is pending until the year-end, as the privatization strategy has got a red line from the Supreme Council of National Defense (CSAT). The strategy has been firstly approved by the Ministry of Finances, Ministry of Administration and Interior, Justice and Competition Council.


Private vs. state: Competing side by side


For 2012, carriers estimate a rather modest growth of this industry, of some 3-4 percent. According to Fan Courier, the local market’s value remains at an amount around EUR 200 million.

The ANCOM statistics noticed spectacular leap in the cross-border traffic in 2011, with reference to the items sent from abroad to Romania, which grew by over 300 percent as against 2010 - to 3,196,000 items. At the same time, the postal items sent from Romania to other countries went down by 16 percent (from 235,716 processed in 2010 to 198,584 processed in 2011).


The services outside the scope of universal service also registered increases in terms of total traffic. In this segment, 103,250,000 items were collected and distributed, accounting for 20 percent of the overall mail traffic in 2011. Domestic items grew by 21 percent compared to 2010, while the cross-border traffic fell by 6 percent.




Carriers: a growing private market


Postal services grew in the last two years and become more differentiated as services. The companies understood that, in order to perform, they need to add innovation and more efficient operations. As DPD Romania’s CEO states, the postal services market can be defined as “mature”, both as parcel and express services and the main trigger for its maturity is represented by the growth of online trade in Romania in the last few years. For DPD Romania, as the manager says, 2012 seems to be a good year and the target of 15 percent growth of the company’s turnover this year is estimated to be reached”. The company budgeted over 800.000 EUR to launch new online services and tailored solutions.


Still, within the mature and steady landscape of a market growing and adjusting to the new consumer trends, the main challenge remains “the innovation”. “The postal services evolved a lot in the last years, they have nothing in common with those offered in times when Romanian Post National Company (Posta Romana) was the mammoth company functioning on the same recipe for decades. Now, the market is deeply impacted by an intense competition that faces more and more selective and exigent customers.  Also, a challenge of this market and impacting the competition of costs and profits, is represented by the increasing costs for fuel, a very significant indicator for the couriers’ P&Ls.


Another big player on the this market, Fan Courier, states that the this industry can be compared as a true barometer of the overall economy, as the postal services stand for regular services for all the companies: international or medium-sized, entrepreneurial, start-ups, developing or mature. The company’s officials estimate that the strong competition defining this industry which have registered a fast growing rhythm in the last ten to twelve years, didn’t fundamentally changed its profile. It is still a heterogenic market, defined by indigene or foreign companies, large international groups or smaller entrepreneurial businesses. “What we have noticed in the last years is an attempt to concentrate de money capitals and, by saying that, we surely refer to the merger between TNT and UPS, from this spring.


The cargo quest for clients


“What really matters is how and when the product reaches the shelf,” one said the general manager of one of the largest logistics company in Romania, KLG Europe Logistics, the Romanian office of Dutch company KLG Europe. Along with companies as Gefco, Ekol, Gebruder Weiss, DSV Solutions, FM Logistic, Delamode Romania, DHL Logistics and DHL Freight, Belgian groups Essers and Van Moer, Ahead Logistics, the company is sharing a market that states a continuous growth. The players on the market base their estimations on the premises that the companies will transform the fix costs in variable costs, in order to optimize the logistics process by reducing stocks and increasing the volume of direct deliveries. Still, the logistics market is operating in the same economic context, as all the others industries and some of the market’s challenges are:  the pressure on prices, the sharp demands of the clients. For instance, the delivery time has decreased significantly since 2008, when a transport order could have been completed within 48-72 hours, according to the players on this market. The pressure on profit margins is being felt all over this market, the companies admit.