October – an avalanche of insolvency of manufacturing (including food) and construction companies


Structural problems: low profitability – a most common cause of insolvency of Polish companies

WARSAW November 2018r.: - Euler Hermes, a leading global insurer of trade receivables, examined the situation of companies in Poland in terms of insolvency. In October 2018, official sources (Court and Economic Monitors) published information on 101 cases of insolvency of Polish companies against 80 in October 2017 (increase yoy by 26%). Since the beginning of this year, the scale of the increase in the number of published insolvencies amounted to + 9% - this year there were 824 of them compared to 753 in the same period of 2017. 

Insolvency includes inability to pay liabilities to suppliers, resulting in bankruptcy or any form of restructuring proceedings. 

Key conclusions:
  • Structural nature of insolvency - good macroeconomic situation did not prevent the next month's increase in the number of insolvencies of Polish companies 
  • The end of a temporary improvement in the construction industry? In October, the number of insolvencies in the sector rose again. 
  • Food trade and production - Polish companies suffer losses despite the increase in consumption
  • Transport - growing number of insolvencies of road freight transport companies, the insolvency of a large passenger air transport company is also noteworthy.
  • Concentration of the growth in the number of insolvencies in the following provinces: Kujawsko-Pomorskie, Lubelskie, Opolskie
Source: Court and Economic Monitor, data analysed by Euler Hermes of the Allianz group.
There are more insolvencies and will continue to come
The number of insolvencies in relation to the previous year may fluctuate in individual months once upwards (more often) and once downwards, but over the whole year this is undoubtedly a clear increase. The third year in a row, and so with a statistically high number of them. This confirms that the trend of the growing number of insolvencies of Polish companies is neither new, nor accidental, nor above all - it is not connected with macroeconomic results. The reasons for the vast majority of insolvencies of Polish enterprises are of a structural rather than a cyclical nature. If so, it is difficult to expect that the growth of GDP, investment or consumption in Poland will be able to reverse this trend in following months, significant for Polish conditions (100 and more insolvencies per month) and the still growing number of insolvencies. 

The reasons, and thus the solution of the problems of Polish companies depend to a large extent on themselves - says Tomasz Starus, Member of the Management Board of Euler Hermes responsible for risk assessment. From the change of strategy from fighting for market share to a model of fighting for profitability of business activity.... Especially that their ally is no longer low labour costs or open borders, creating as many opportunities as threats - contributing to the gradual levelling of differences in wages, free movement of labour force and the need to compete with foreign companies not only on export markets, but also on the domestic market. 

There are no too big companies to fail – trading casus
High spending on consumption is not enough to keep all companies trading in consumer, retail and wholesale goods on the market - not only the smaller ones, but also companies from the top ten-twenty largest food distributors (operating in parallel in the retail and wholesale sectors due to franchise). Another domestic tycoon on this market has gone down in history... and new ones are appearing in its place. The sector is therefore extremely competitive, not excuse any errors or delays in responding to market trends. This translates into....

Losses of food producers
The group of food producers was the largest (8 companies out of 29) in the group of production companies that went insolvent in the previous month (published insolvencies). This is not an effect of an economic downturny – for example in the meat industry ("pig’s hill", export restrictions due to swine fever, etc.). Problems are equally experienced by companies from the cereal, fruit and vegetable and dairy industries... This confirms Euler Hermes' observations that, contrary to appearances, the liquidity of the sector is not the best – worse than in the past years. Not only smaller producers disappear from the market, which is a result of concentration in trade, forcing the consolidation of producers supplying it. Concentration in trade is a concentration of potential (and partially real) losses, which is compounded by the problems of small shops, which do not withstand price competition with the biggest ones. The analyses conducted by Euler Hermes show that the entire food sector, which is powerful in terms of weight and value of production, has for over a year been recording a worsening inflow of receivables from its customers. Food producers wait for their receivables even up to a week longer than the average in the last 5 years. These receivables flow not only much slower, but also the scale of evident losses is greater - the value of receivables extremely (more than 120 days after the due date) not paid, thus coming from permanently insolvent customers. 
Source: Court and Economic Monitor, data analysed by Euler Hermes of the Allianz group

Construction - problems with profitability despite an avalanche of orders
October brought information about insolvencies of a larger number of construction companies than year before. In addition, these are also usually cases of companies larger than in previous months, operating, outside the exceptions, in the range of 30-60 million PLN turnover.  Therefore, these are not the main contractors of key, central infrastructure investments, but nonetheless non-accidental companies, existing on the market for years... They lost, among other things, the struggle for the employee (with the largest companies), but above all they lost in terms of the ability to finance on too large a scale and for too long a period of time of orders being executed. Therefore, they did not accumulate sufficient reserves allowing them to maintain financial liquidity in the situation of..... no - not a downturn, but an increased number and value of orders. 

The financial liquidity of the sector is insufficient despite the mentioned bull market (boom in terms of the number of orders and the value of current works), which is (and certainly should be) the reason for the cautious approach of suppliers of construction materials, who in effect fall into insolvency almost as often as food producers (7 out of 29 insolvent production companies in October) – says Tomasz Starus. Not to mention the external financing institutions - low profitability of the construction works carried out, definitely below the cost of money in practice excludes the use of external capital by contractors, unless it is capital from the parent company (the largest construction concerns) or comes from suppliers of materials and subcontractors....


Source: Court and Economic Monitor, data analysed by Euler Hermes of the Allianz group


Contact for the media:

Euler Hermes
Grzegorz Błachnio
tel. 601-056-830
multiAN PR
Artur Niewrzędowski
tel. 509-433-874


Euler Hermes is the global leader in trade credit insurance and a recognized specialist in the areas of bonding, guarantees and collections. With more than 100 years of experience, the company offers business-to-business (B2B) clients financial services to support cash and trade receivables management. Its proprietary intelligence network tracks and analyzes daily changes in corporate solvency among small, medium and multinational companies active in markets representing 92% of global GDP. Headquartered in Paris, the company is present in over 50 countries with 5,800+ employees. Euler Hermes is a subsidiary of Allianz, and rated AA by Standard & Poor’s and Aa3 by Moody’s. The company posted a consolidated turnover of €2.6 billion in 2017 and insured global business transactions for €894 billion in exposure at the end of 2017. Further information: www.eulerhermes.com. LinkedIn or Twitter @eulerhermes.

The Euler Hermes group has been present in Poland since 1998. Towarzystwo Ubezpieczen Euler Hermes SA offers trade receivables and insurance guarantees. At the same time, the second company operating on the Polish market - Euler Hermes Collections Sp. z o. o. offers debt collection, trade reports, risk assessment and industry analysis programmes. Customer service is provided by Euler Hermes Services Polska Sp. z o. o. z o. o.

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