Inside the world of business

Sisk's long and winding road

EXHIBIT A (pictured above). A stretch of motorway in central Poland. The aerial shot shows the neatly completed 30km stretch of Poland’s A1 motorway, completed by Sisk and Roadbridge as part of a joint venture earlier this year. The bottom of the photo shows an uncompleted section from a different contractor.

The picture encapsulates the problems besetting the Polish construction sector – and by extension the economy. The Polish construction industry, which was racing ahead at breakneck speed for the last few years, has now, it seems, reached the end of the road. Sisk and Roadbridge are the latest international operators to pull out of the country, leaving unfinished roads in their wake. (Sisk and Roadbridge completed one out of three road projects they were building.)

The writing was on the wall for Sisk from early this year when its two Polish partners in the project collapsed. Sisk has defended its decision to enter the Polish market, pointing out that it partnered with reputable, €1 billion- turnover Polish companies. “Hindsight is a great thing,” chief executive Liam Nagle said yesterday.

Sisk lays the blame at the feet of the Polish authorities, accusing the national road authority of excessive bureaucracy and intransigence in terms of negotiations on spiralling costs.

Others point to a culture of excessively low valuations by companies at the tendering stage.

Whatever the reasons, the overarching cause has been the overheating of the construction sector. Poland’s low level of infrastructure when it joined the European Union in 2004 meant it was playing catch-up with other states, while the rush to complete roads was given added impetus by the nation’s hosting of the European Championship this year. The infrastructure spurt coincided with an economic slowdown in other countries, with the result that many international construction companies from places as diverse as Ireland, Spain and China hotly competed for the tenders. The debacle points to the often close connections between governments and the private sector in business, particularly in the private sector. It also raises questions about the use of European funds. With much of the money used to build Polish roads coming straight from EU cohesion funds, the sight of abandoned road projects should be raising some eyebrows among European authorities.

It's not all fun being a Russian metal tycoon

THINGS DON’T seem to be much better in Russia if we are to believe Oleg Deripaska, Russian oligarch and chief executive of Aughinish Alumina owner Rusal.

Deripaska has been giving out recently that the Russian government is too busy squeezing money out of industry to reform it. “The government is almost fully funded by rent and it’s very difficult to persuade them to move in a different direction in terms of taxes, tariffs,” he told the London Times this week.

Rusal is clearly feeling the pressure as falling aluminium prices eat into earnings and its ability to service its $11 billion worth of debt. In a wide-ranging “go” at the Russian government, he singled out for criticism the requirement that if Rusal wants to buy power from its own power plants it must first sell it to the Russian national grid and then buy it back at market prices.

He has no such problems in Limerick, where Aughinish was allowed build its own on-site power station as far back as 2003 – prior to its takeover by Rusal – and is currently able to sell its surplus power into the national grid at a guaranteed price.

One has to wonder if Deripaska ever stops to wonder why he is able to get such favourable treatment in a country where he wields no special influence – other than being a very larger investor and employer – while back home in Russia, where fellow oligarchs such as Roman Abramovich are supposed to call the shots politically, he is stymied at every turn.

So, America, how do you like them Apples?

THE FANFARE that greeted Apple’s iPhone5 doesn’t seem to be waning, with iPhone fever in full swing. Shipment dates slipped by a week on the first day of sales, Apple’s website showed yesterday, suggesting overwhelming demand for the slimmer, lighter and faster version.

Apple’s US store, at, was projecting shipments would take two weeks to fulfil, with analysts saying the date slipped within an hour of the start of presales.

With first deliveries set for next Friday, analysts have expressed surprise at how quickly Apple planned to roll out the new model around the world, saying the suggested supply constraints that afflicted past releases would not seem to be a problem this time.

Hardly surprising, given that JP Morgan recently upped estimates from 147 million sales in 2013 to 168 million, while Morgan Stanley reckons sales could hit 266 million. With Apple reportedly enjoying gross margins in the region of 50 per cent on its phones, it’s not surprising that Apple shares are on the rise. They added 1.9 per cent to reach a new all-time high of $695.86 yesterday, before easing back a little to $694.77 on the Nasdaq.


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