BUSINESS AND PRODUCTION

The Rubber and Plastics Industry

- an Unprecedented Boom
in the Manufacturing Industry
The Czech rubber and plastics industry
(NACE Division 25) has been thriving to
an extraordinary extent in the last few
years, and its position wilhin the
manutaeturing industry has been growing
stronger. In contrast to most other
sectors, it went iinaiYected by the ups and
downs ol' the world economy and
domestic economic reforms, and its
gr(.)wth rate has been markedly above the
average for the manutaeturing industry.
The outlook for the seetor is promising
in view of the new opportunities in the
application of plastic materials in
industry, construction, the energy
industry, and agriculture, as well as in
manufacturing industry. Its share in the
revenues of the manufacturing industry
rose from 3.1 per cent in 2001 to 5.^ per
cent in 2002. placing it sixth (and for the
first time ever above the chemicals and
Pharmaceuticals industry). This trend
continued in 2003, and, according to
preliniinar) results, the sliare in revenues
increased to 6.4 per cent. Investment in
the sector gives rise to new business
entities every year, and in eontrast to
1: Revenues from the sale of products and services in current prices
in the 1998-20tl3 period
niiltmnC/K t998 20(W
other sectors, the number ol' employees is
increasing - the year-on-year increase
was less than I per cent in 2002. and
[iiorc than 5 per cent in 2003.
The Main Kconomic Indicators
Prices in NACE Divisi(Mi 25 have been
steady over the last five years. This applies
to branch 25.1 in particular, in which
minimal year-on-year price fluctuations
have been recorded since 1999. In branch
2(M)t 2002 2(M13*

households and leisure time activities. NACH2.S.1 19 372.1 24 786.x 2K417.0 43 170,8 47 210,8 , 58 292.3
NACE 25.: 43 3 I L 9 4? 056.2 52 679.8 61 820,0 62 071.4 i 72 646.3
Under the NACE Rev. I international TOTAL 25 62 684,0 67 S43.() 81 096,8 104 990,8 109 282-2 J 30 938.6
classilicatioii, the sector is divided into ycar-on-year index
two hranches: (curroni prices) X 108.2 119.5 129,5 104.1 i II9.S
25.1 Manulacture of rubber products ciiinulalcd index
(currenl prices) 100.0 [08.2 129.3 167,5 174.3 ' 2(18.9
such as tyres and tubes of all types
consianl prices Ibr 2(MH). NACti - InlerniWional Valid Classificalion
(approximately two third.s of total Siiune: Czech Sliilisiiciil Offive. Mini.sliy of Industry and Trade iidculnliims
production), and a broad range of rubber
products (44.5 per cent of sector 25 Table 2: Number of employees in the 1998-2003 period
products); employees 1998 1999 2000 2001 2002 2003*
2.'S.2 Manutacture of plastic products
NACE 25.1 ; 14 923 15 400 16 659 i 18 660 18 879 19 053
such as plates, profiles, packaging
materials, and products for construction. NACE 25.2 j 38 635 39 888 39 914 44 939 45 248 48 462
engineering, and the electrical industry TO! AL 25 5."^ 558 55 288 56 573 63 599 64 127 67 515
(55.5 per cent of sector 25 products). year-on-year index X 103-2 102.3 112.4 : 100.8 105.2
As mentioned above, this sector holds ciimulaled index 100.0 103.2 : 105.6 118.7 119.7 126.1
an increasingly strong position in the Source: C;eili Slutistical Office, Ministry of industrv tind Trade ccilcultilions
I EUR ^ 32,51 CZK, 1 USD = 27.12 CZK (average ()4/20(Ml

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32/07-08/2004
BUSINESS AND PRODUCTION

25.2. prices declined in 2001 and 2002
despite noticeable fluctuation in
petroleum priees. The reasons for this
downward trend rest in the tairly low
prices of bulb plastics, stable prices of
plastics for construction, and increasing
competilion. which was reflected in the
prices of the final plastic products.
The main production characteristics of
the sector in the 1998-2003 period are
shown in Tables 1 and 2.
Detailed analysis of the basic indicators
in 2002 and 2003 yields the following
conclusions:
• In spite of the world recession.
including in the automobile and electrical
industries, the revenues of the seetor have
been rising continually - more than 4 per
cent in 2002, and 19-8 per cent last year.
The dynamic growlh in the revenues of
branch 25.1 was mainly due to BARUM
Continental, spol. s r.o.. but increases in
the revenues of branch 25.2 were also
above the manufacturing industry
average. The chief reasons for this
favourable development were secured
sales (mainly to the automobile and
electrical industries), and the fact that the
August 2002 tioods inflicted minimum
losses on the sector.
" A specific feature of the sector is the
rising number of employees, which is an
exception in the manufacturing industry.
The number of employees in the sector
rose by almost I per cent to more than
64 000 in 2002. and by 5.2 per eent in 2003.
The reason for this was the increased
number of enterprises in branch 25.2 in
the category of 20 and more employees.
• Produetion indicators (2003 data are not
yet available) show that costs are
increasing steadily in the sector - in 2002
costs stood at 21 per cent while revenues
increased by less than 16 per cent. In the
1997-2002 period, eosts rose by 116.3
per cent, and revenues rose by almost 110
per cent. This was mainly due to the
higher cost of inputs, and the increased
number of employees.
• The inerease in statf costs was similar to
the increase in total eosts in 2002 (21.1
per cent) - in branch 25.1 the rise was
almost 10 per cent, and in branch 25.2 it
was almost 27 per cent.
• In 2002. the productivity of labour from
value added in the sector increased by 10
per cent - 10.5 per cent in branch 25.1.
and 10,1 in branch 25.2. This was one of
the best results in the manufacturing
industry, where this indicator inereased
by a mere 0.2 per cent. Only one other
sector - manufacture of electrical and
optical equipment - a c h i e v e L1
a comparable result, with an increase of
9.5 per cent.
• In 2002. the share of staff costs in the
book value added increased by 5.7 per
eent. It remained at the 2001 level in
hranch 25.1. and rose by 7.7 per cent in
branch 25.2. This was similar to the
increase across the whole manufacturing
industry {+ 5.X per cent): the main cause
was the absolute increase of 4 240
employees in branch 25.2. whereas
a slight year-on-year decline was
rec(»rded in branch 25.1.
The Development of Foreign Trade - an
Extraordinary Increase
Trade in the NACB Division 25 sector
has been developing extraordinarily
rapidly in the last six years. In this
period, exports rose 2.2-foId - by 185.7
per cent in branch 25.1, and by 77.4 per
cent in branch 25.2. Exports in branch
25.1 exceeded exports in branch 25.2 hy
CZK 550 million in 2002 for the firs't
time, mainly due to the manufacture of
tyres.
The rate of imports was also high (the
2002/1997 index was 184.4). The main
reason is that some types of rubber and
plastic products are not manufactured in
the Czech Republic, or domestic producers
cannot fully meet increasing domestic
demand. Over the six years, imports
increased by 90.6 per cent in branch 25.1.
and 82.2 percent in bratich 25.2.
The {.leclining deficit since 2001 due to
the high surplus in branch 25.1 (inerease
of CZK 12.4 billion in 2002) has been
favourable.
Very good results were recorded in
2002 - the year-on-year rise in exports
was 10 per cent (23 per cent in branch
25.1, and stagnation at the 2001 level in
branch 25.2). and imports increased by
just 1.1 per cent. This reduced the deficit
by almost CZK 5 billion.
Preliminary results in 2003 show that
exports in Ihe sector increased by 7.6 per
eent to CZK 69.5 billion, but itiiports
increased by 10.6 per cent to almost CZK
H\ billion, and so the deficit remained at
roughly the level of the previous year -
CZK ri.5 billion.
For example, the development of
foreign trade according to direct
exports/imports in the NACE Division 25
sector was as follows: In 2002. total
exports were CZK 64 billion, and imports
were CZK 45.2 billion. This increased
the surplus in the sector by 10 per cent
against 2001. to CZK 18.8 billion.
Variation in export effieiency has
ranged between 43 and 4S per cent over
the last few years: in 2002. it improved
by 5 per eent as compared with 2001. and
stood at 47.7 per cent. Export efficiency
is much higher in branch 25.1 (up to 61
per cent in 2002. and below 39 per eent in
branch 25.2).
There have been no major lluctuations
in import demand in the seetor - this
indicator was between 29 and 35 per
cent. Demand for imports is higher in
branch 25.2 (at around 35 per cent) than

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Dukelska 44, provozovna: Wolkerova 1267
358 01 Kraslice, Czech Republic
phone: +420 352 696 257. fax: +420 352 696 257
mobile: +420 724 338 502
e-mail: techplastkraslice@c-box.cz

TECHPLAST KRASLICE, spol.s r.o., specializes in thermoplast moulding. * PRODUCTION

PROGRAMME *: Manufacture of precise technical components of thermplast and thermoset - fully
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34/07-08/2004
BUSINESS AND PRODUCTION

in branch 25.[ (which saw a decline lo
27.6 per cent in 2002), as dotnesiic
production in branch 25.2 cannot fully
meet domestic demand.
Inward processing is playing an
important role in the sector. In 1999 for
example, it accounted for 27.1 per cent of
turnover, and 28.5 per cent of exports.
This was followed by a decline in the
role of inward processing, which was
21.1 per cent in 2002. The situation
ditTered in individual branches. In 2002.
the share of inward processing in foreign
trade turnover was 5.7 per cent in branch
25.1. and 25.6 per cent in branch 25.2,
and the respective share of branch 25.1 in
exports was just 6 per cent, while it was
more than 29 per cent for branch 25.2.
Graph I sht)ws that Germatiy was hy
far our largesi trade partner in this sector
in 2002 (with turnover of CZK 62.7
billion, and deficit of CZK 9.8 billion).
Our turnover with Germany increased by
CZK 1.9 billion in 2002, hut the deficit
remained ai the level of the previous year.
The foreign irade results are better in
Graph 1: Territorial division of 2002 foreign trade - NACE Division 25
Export territorits in 2002
Belgium 4<;i Austria 4'7f
nil 471 XAGieM
France 7'J
the NACE Division 25 seckir ihan in the
chemicals industry, NACE Division 24.
Besides Germany, we have a high deficit
in trade with Italy (CZK 2.9 billion).
Austria (CZK 1.5 billion), and the USA
(CZK 894 million). In 2002, we had
a trade surplus with France (CZK 1.1
billion), Slovakia (CZK 1 billion). Great
Import territork's in 2002
Briiain

The Territorial Structure of Foreign

Trade
The territorial structure of foreign trade
Source: Sliitislics of ihe Geiicrcil Directorale ofCii'itoms, Miniilry oj Industry and Trade cahiiliuioiis
in the sector can be seen in Graph I. NACE - Inlematiimyl Valid Cla^sillcuiion

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Our company ^i55?iaHzes in production and advisory aaivities in the area of

packaging materials and packa^in^ technolos^y. Individual packaging solutions
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the help of Ihe 3D CAD Solid Works system.
All proposals, including optimalization of packaging, are dealt with here.
All ( ^ packaging is tailor made, based on specific demands for packaging
a particular product.

Production activity:

m
Manufacture of PE, PL) and PP foams with different surface finishes
and different weight by volume
Manufaaure of solid PP materials (cellular polypropylene)
EP£ and EPP foaming of packaging Injected into moulds
Combination of our foams and other materials (e.g. paper, wood,
metal, plastics)
lloromyslicka 315
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36/07-08/2004
BUSINESS AND PRODUCTION
Britain (CZK 676 million), Poland (CZK
352 m i l l i o n ) . Belgium ( C Z K 287
million), and Spain (CZK 280 million).
Foreign Direct Investment
There was a boom in foreign investment
in the sector in 2000 and 2001. when
foreign direct invcstmenis tutailed ahnosl
CZK 23 billion. Large invesiments, in
several cases supported by investment
incentives, went to branch 25.2, but also
to branch 25.1, to tyre manufacture (for
example, Barum Coniinenlal spol. s r.ii.
and MITAS a.s.). A slower rate of foreign
investment is expected in the coming
years. But some investment will continue
thanks to the plans of the automobile
industry, and existing opportunities for
the applicalion of plastic materials in
various areas.
International Comparison
and Compi'titiveni'ss
This sector has been developing very
dynamically, both in this country and
across the world since the mid-1990s.
There are many reasons for this, chief
among them the development of the
automobile and eleclrical industries,
particularly in the developing countries,
and the opportunities for the application
of plastic and rubber products in the
manufacturing industry itself, as well as
in food manufacture (packages), the
power industry, agricullurc, construction,
and goods ibr households and leisure
time.
The dynamic development of the
NACF Division 25 sector in the Czech
Republic has been increasing its
competitiveness on international markets.
The situation in the productivity of labour
from value added (in the GDP parity) has
also been improving steadily. According
lo our calculations, its value has exceeded
50 per cent of that of Germany and
Austria, and is on the rise due to the stable
RANIIOL
THE LARGEST MANUFACTURER OF POLYETHYLENE FILMS IN THE CZECH REPUBLIC
Holder of TUV EN ISO 9001 Certificate
GRANOTEN
- beat-shrinkabie films
- palletization films and bags
- packing filrns
- co-extruded three-layer fiims
MIKROTEN
- tbin HOPE fiims
- bags, packaging sheets and food bags
PERFOTEN
- perforated HOPE fiims for packing foodstuffs
- PP strapping bands
SEPATEN
- fiims for construction purposes
38/07-08/2004
developmenl of our rubber and plastics
industry. Nevertheless, the sector still has
opporluniiies to improve competitiveness
in the developed world. These include
a greater range of products with high
value added, and greater specialization,
particularly in plastic products. In the
next few years, however, it will be
impossible to influence external factors
such a.s world prices of basic raw
materials such as petroleum and natural
rubber. Coinparison with the CEFTA
couniries is favourable for the Czech
Republic, mainly due to the
manufacturers of tyres and tubes.
The role of small and medium
enleiprises has already been emphasized.
In addition to the manufacture of lyres
(which are very competitive on world
markets), the Czech Republic has seen
favourable developments in the partial
final production of multinational firms, to
an extent requiring co-operalion in
seciors u.sing plastics. Their processing
demands ctinsiderable funds and
knowledge. These requirements have
been most apparent in the automobile and
electrical industries. Foreign firms made
large invesiments in the plastics industry
in the Czech Republic in the 1993-2002
period. Multinational companies with
blanches in this country include
SIEMENS (with nine factories), Robert
BOSCH (four factories), TRW of the
USA (seven factories), JOHNSON
CONTROLS, VALEO. PEGUFORM,
and others.
The state of research and development is
much less favourable. The reasons include
an excessively large range of products, and
insulTicient research and dcvelopmeni base
(several specialized research institutes were
closed in the period of reforms). In contrast,
it is positive Ihat foreign investors bring
new modern technologies and know-how,
and mediiitc access to new markets for
Czech Hnns.
Phone: +420 554 780 111
pax: +420 554 780 110
E-mail: prodej@granitol.cz
.. • ' ^ = '
www.gran.tol.cz
PRINTEDCARRIERBAGS
F L E X O G R A P H I C 8 - C O L O U R P R I N T I N G OF ALL K I N D S OF FILM
The Outlook for the Sector is Good
The rubbei' and plasiics industry will be
influenced hy a number of factors in the
coming years. These factors will include
the development of world petroleum
prices and prices of the main elastomers,
the boom in some manufacturing sectors,
parlicularly the aulornobile, electrical,
and packaging industries, the
harmonization of Czecb standards with
those of Ihe FC, the strict laws on waste
(resulting in more recycling), and the
implementation of new FC legislation
relating to the chemicals industry
( R F A C H ) . Practice shows that the
winners are plastics processing firms,
which can operate globally and deliver
high quality products to customers
anywhere in the w o r l d promptly.
Fleetronic business networks are
developing rapidly abroad: some of these
are independent of manufacturers, and
some are producers" own portals.
Ct)mpanies processing plastic materials
must respect a clear rule: they must find
final users on the main markets, establish
their own shops and service centres, and
construct plastics processing factories at
regional and local levels. The outlook for
the sector in the Czech Republic is good
due to investment, particularly in branch
25.2, and keen competitiveness in the
manufacture of tyres and tubes. The
accession of ten new countries to the FU
opens up many opportunities, as the
consumption of plastic materials in the
countries ol Eastern Europe is far below
the world average - approximately 11 kg
per capita in 2000, as compared with 90
kg per capita in Western Europe in the
same year.
Eva Vesela
Milan Drazdil
Chemical and Pharmacculical Section
of the Ministry of Industry and Trade
(e-mail: vcsL'la@mpo.cz
e-mail: drazdilC"''nipo.cz)
AKCIOVA
SPOLECNOST
MORAVSKY BEROUN
793 05