The furniture, electric battery, and vehicle and machinery parts manufacturing industries are all currently experiencing some of the most significant export declines. Without foreign sales, good results for any sector can be challenging. The National Debt Register’s latest data indicate that the industrial sector debt has reached 1.19 billion PLN, with 370 million PLN of that representing funds frozen in unpaid invoices. Rzetelna Firma’s experts believe that producers often give their customers credit without justification.
There is a silver lining in the form of the latest PMI index values for Polish industry, which showcase the dynamic changes in industrial production in Poland. A value above 50 indicates an economic upswing, while a value below suggests regression. S&P Global reported a score of 49.2 for October, the highest in two and a half years. The last better result was recorded in April 2022 at 52.4—a value above 50 for the last time indicating growth in the sector, separating it from a drop. Although there is still an air of pessimism, the increase in the PMI index for Polish industry is a sign that domestic demand is regaining momentum. However, reduced foreign demand remains a substantial problem.
According to the Central Statistical Office’s (GUS) most recent data, industrial production fell by 0.3% in September compared to last year, although it increased by 9% compared to the previous month. GUS estimates suggest that exporter condition will continue to weigh down results, primarily due to the economic downturn in Germany, where a stronger recovery is likely to begin in 2025 at the earliest. This could be a chance for the situation of Polish industrial companies, who consider Germany their primary market, to improve.
Industrial companies’ debt currently amounts to 1.19 billion PLN and applies to 23.2 thousand entrepreneurs according to the latest data from the National Debt Register. The average debt per entity is 51.4 thousand PLN. Still, payment backlogs are another significant issue in the same sector. Producers must recover nearly 370 million PLN from unreliable customers, which is a third of the amount they owe their creditors.
The most significant shortcomings among companies are in the metal industry, directly related to residential construction, which is currently at a standstill, leading to weaker payment flow. This segment has a huge 221.1 million PLN to return to its contractors. The next most indebted businesses are food manufacturers with 153.5 million PLN, followed by companies dealing with the repair, maintenance, and installation of machinery and equipment, which owe 110.6 million PLN. Firms manufacturing wooden goods are last, needing to pay nearly 87 million PLN to their co-workers.
The issue for Polish industrial companies right now is the weak demand and rising costs, labor costs in particular, which act as substantial barriers to their operations. The export drop, directly linked to the two most serious problems in European economies, doesn’t help them either. The first is the housing market crisis, limiting the demand for durable goods like furniture and household appliances. The second is the European automotive industry’s waning position, which, while losing its competitive edge to China, is simultaneously grappling with meeting climate policy requirements. The National Chamber of Commerce estimates that by 2024, exports might decrease to 333.2 billion euros, i.e., a 0.7% drop compared to previous years.
Overall, the industrial sector is not just large factories devoid of issues. Instead, they’re a significant number of small businesses who act as their subcontractors. Almost half of the debt, approximately 507 million PLN, burdens these single-person businesses.
Sandra Czerwińska, an expert at Rzetelna Firma, commented, saying, “According to a ‘Trust in Business’ survey conducted by TGM Research commissioned by Rzetelna Firma, 83% of manufacturing industry entrepreneurs trust their counterparts, to whom they issue invoices with deferred payment dates. Only 34% of producers base their trust on hard data and verify business partners before starting cooperation. So every other one of them gives credit without reason.”
Adam Łącki, Chairman of the Board of the National Debt Register Business Information Bureau, added, “Over the past twelve months, the percentage of companies in the highest category A has increased by only 1.6%. However, those with the lowest rating H increased by 2.4%. This indicates a deterioration in the financial condition of manufacturing enterprises.”
The ongoing weak domestic demand and shrinking exports prove problematic for Poland’s industry. This is especially true for exports to Germany, which remains the largest market for Polish industry.
Small companies now face the burden of ensuring their financial security, practicing limited trust policies through shorter payment terms, and implementing receivables monitoring to take control of timeliness of payments from contractors.
Analyzing debt through a geographical lens, the companies from Mazovia have the most significant problems settling their obligations, totalling 221.5 million PLN. Following behind are companies from Silesia and Greater Poland, with 173.8 million PLN and 121.8 million PLN respectively. One particular manufacturing company from the Silesian province owns an alarming 13.6 million PLN in debt, largely to an energy supplier.
Producers are elderly awaiting payment from securitization funds that have bought debts from original creditors, mainly banks. They are owed 348.6 million PLN. The financial sector, including banks, leasing companies, factoring companies, and insurance companies, are waiting for 352.9 million PLN owed by manufacturing companies. Unpaid energy bills sit at almost 135 million PLN.
Jakub Kostecki, the president of the board of the debt collection company Kaczmarski Inkasso, stated, “The current situation in the industrial sector is a challenge not only for large factories but also for thousands of smaller companies, who, as subcontractors, are critical links in the supply chain. Many companies do not settle obligations due to limited domestic demand and shrinking exports, especially to Germany, which remains the largest market for Polish industry. That’s why smaller companies should take care of their financial security.”
Source: https://managerplus.pl/polski-przemysl-wyprodukowal-prawie-12-miliarda-zlotych-dlugow-15268
