Sdružení pro zahraniční investice

04.02.2009, The Czech Republic and Italy do not share a common border and are separated from each other by Austria and several mountain ranges. Yet the two countries maintain active economic relations and although Italy does not rank among the Czech Republic’s top five trading partners or investors, a good number of Italian companies and entrepreneurs have been very active in the country.

Eni fuels Czech automotive transport

The largest Italian investor in the Czech Republic by volume of capital invested must be the petrochemicals group Eni, owner of the Agip brand. Eni took an active part in the wave of privatisations that took place in the 1990s and acquired 16% of shares in Česká rafinérská, the largest crude-oil processor and producer of petroleum products in the Czech Republic. Other investors in Ceska rafinerska at that time included Shell and Conoco. Eni later acquired Conoco’s 16% stake and now owns nearly a third of Česká rafinérská, which employs some 700 people and has two major oil refineries in Litvinov and Kralupy. In addition, Eni runs a network of more than 70 petrol stations in throughout the Czech Republic.

Another privatisation and one of the first Italian investments in the Czech Republic was the acquisition of the Brno-based company Nová Mosilana by the Marzotto Group in 1994. One of the leading manufacturers of men's and women's clothing and fabrics made from worsted yarn, Mosilana represents the Czech wool-processing industry, whose origins can be traced to the 12^th century. The whole production process, ranging from the input of raw materials to the production of finished fabrics takes place in the company’s Brno production facility. Thanks to modernization and the expansion of production and storage facilities with the addition of new buildings, the company has managed to increase its annual output of fabrics to nine million square metres. Nová Mosilana exports over 90% of its output to the most advanced international markets through its parent company’s trading network.

Beghelli-Egplast was established in 1999 through the acquisition of Elplast, a Czech producer of industrial lighting products with a history dating back nearly 130 years, by the Italian company Beghelli. Through its acquisition of Elplast, Beghelli expanded its product range to include Elplast’s industrial and technical lights. The Italian parent company took immediate steps to restructure its new Czech subsidiary and invested in modern production technologies. Thanks to these steps, the company is now the market leader in the technical- and emergency-lighting market in the Czech Republic and is systematically expanding to other countries of Central and Eastern Europe. The Czech subsidiary has some 300 employees and its products are installed in prestigious locations such as Prague Airport.

In the 1990s Seves, a holding company, acquired the Czech company Vitrablok, a specialist glass-block manufacturer steeped in the Czech glassmaking tradition.

Another acquisition of a traditional Czech producer by an Italian firm was the purchase of Akuma by Fiamm in 1998. Established in 1903, Akuma originally produced standby batteries and, from 1925, starter batteries for motor vehicles, supplying Škoda Auto, for example. The company expanded production significantly and in 2000 a new production facility was built. Nevertheless, in early 2008 Fiamm announced that the production of starter batteries would be transferred to Italy and the Czech subsidiary would concentrate on manufacturing standby batteries. Contrary to what one might expect, this change does not bring any job losses. In fact, the company will hire at least 40 additional employees to supplement its staff of approximately 700.

Acquisition of a “crown jewel”

Another prominent and closely observed acquisition was that of the machine tool producer ZPS by Tajmac-MTM in 2000. ZPS was considered by many to be a “crown jewel” of Czech Industry. Established in 1903, the company was closely associated with the rise of the Baťa shoe company in the 1920s and 1930s as it produced all of the machinery uses in Baťa’s plants. After the second world war, it was one of the main suppliers of machine tools to the countries of the Soviet bloc and exported to many other countries in both the developing and developed worlds. TAJMAC-ZPS, as the company is called today, has maintained its position as one of the Czech Republic’s leading producers of machine tools and one of the country’s largest exporters (more than 80% of its production is exported). The company has extensive research and development operations and its own foundry, which enables it to design and manufacture solutions for all types of clients.

More recently, Tessitura Monti acquired two weaving plants from Texlen, Czech textiles holding company, in 2004. The plants, both in the East Bohemia region, employ some 500 people and, unlike other Czech textile plants, are expanding production and looking for new employees. Another recent deal was the acquisition of Obal Rozkoš by Tecnocap in 2005. The company, located in a village near Jindřichův Hradec in the South Bohemia region, has been producing metal lids for glass, plastic and metal containers for use both in the food-packaging industry and for pharmaceutical and cosmetic products since 1936.

IVECO / IRISBUS

The Italian company Irisbus was established in 1999 as a joint venture between Iveco of Italy and the French company Renault Vehicles Industrielles. In 2001 Iveco began acquiring Renault’s shares in the joint venture and in 2003 became the full owner of the company. One of Irisbus’s major manufacturing plants is in Vysoké Mýto in the East Bohemia region of the Czech Republic.

The history of vehicle manufacturing in Vysoké Mýto dates back to 1895, when Josef Sodomka began manufacturing carriages and coaches. Production of buses started in 1928. After the second world war the company took the name Karosa, which it held until January 2007 when it became Iveco Czech Republic. In the years preceding the political and economic changes of 1989-90 the company was producing 3,400 buses and coaches per year. However, within two years of the collapse of markets in the former Soviet bloc, annual production fell to 1,000 units. Fortunately, Renault bought a third of shares in Karosa at that time (1993) and invested heavily in the company’s restructuring and introduction of new models. It also subsequently increased its stake in Karosa to 100%. In early 1999 Karosa became a part of a French-Italian joint venture and began construction of a new paint shop and assembly line. Investments totaling more than CZK 1.5 billion have made in the Vysoké Mýto plant, making it one of the most modern bus manufacturing facilities in Europe. More than 80% of production is exported, with France and Italy being the main foreign markets. The company employs roughly 2,500 people and it seems that it will soon manufacture the same number of buses and coaches as it did nearly 20 years ago – production reached 2,700 units in 2007. 

Greenfield investments

When the possibility to acquire existing Czech firms diminished with privatisation nearly over and the best companies already in foreign hands, Italian and other investors started to invest in construction of new production facilities on greenfields, mostly in municipal industrial zones prepared with support from the national government.

Among the first was the Radici Group, theItalian multinational in the chemicals and synthetic-fibre sector. In 1998, the company built a facility to produce polyamide yarns for the carpet industry in Podbořany, approximately 90 kilometres west of Prague. Today the facility employs nearly 300 people today, double the number announced in 1998.

The industrial zone in Podbořany is also to Conta, a subsidiary of Candy Electtrodomestici. The Conta plant is the largest Italian greenfield investment in the Czech Republic. The plant produces refrigerators under the Candy and other brand names. Construction started in the fall of 2000 and the plant was opened in the spring of 2002. More than USD 40 million was invested in the plant. A second production hall was opened in 2005. Today Candy employs over 600 people in the Czech Republic and plans to add another 200-250 jobs. Candy also brought to Podbořany its supplier Leaplast, a manufacture of plastic parts for refrigerators.

Another Italian plastics producer, Viroplastic, built a manufacturing facility in Frýdek-Místek. The plant manufactures a wide range of plastic caps for glass, PET and PVC containers for beverages, cosmetics and detergents. The facility employs approximately 300 people. The Italian company  Cromodora Wheels, part of American-based Hayes Lemmerz, built a plant in the same region in 2006. The plant’s staff should grow from the current 90 employees to 300 in 2009.

With a population of just over 10.3 million, the Czech Republic in not a very large market. Therefore most investors have come to the Czech Republic to manufacture products for export. For example, BAG Snacks, a producer of fried and baked snacks, has operated a production unit in the Czech Republic since 1997. This facility is not only a production for the Czech Republic and Eastern Europe, but also a strategic outpost for Northern Europe, as it allows a significant reduction of transportation costs.

Automotive and engineering sectors

Both Italy and the Czech Republic have a vibrant automotive industry and it would be surprising if many of Italian investments were not in the automotive industry. In addition to those already mentioned, Italian investors in this sector include Meyster, which opened a manufacturing facility in Strakonice in 2001. The plant employs 80 people in the manufacturing of wheel covers, tow-bars, and car seats.

IVG Colbachini, a producer of pipes, hoses and other components, opened its first subsidiary in Central and Eastern Europe in Krnov in the northeast of the Czech Republic in 2003. IVG Colbachini also owns 51% of the Italian company S.T.I., which manufactures small metal precision parts for the automotive and motorcycle industries. The company opened a manufacturing plant in Krnov in 2006. The facility exports its products to companies such as Bosch, Siemens, and Harley Davidson.

Impianti e Macchine Fonderia (I.M.F.), was one of the early entrants into the Czech market. The company has designed and manufactured machinery and equipment for foundries and tube-rolling mills in the Czech Republic since 1996. Graziano Trasmissioni (now a part of the Oerlikon Group), began production of gearbox components for the automotive industry in Červený Kostelec in 2006. The Czech company was established in February 2006, initial machining operations began in May 2006, and by October 2006 machining and heat treatment were fully operational, and the gear-manufacturing plant was in production. In November 2007, the first full assembly program was started for the production of Torque Hub planetary-gear-drive assemblies for a sister company in the United States. In the meantime, Graziano had won two new contracts for the manufacture of automotive power-transfer units for 4WD cars, which were to be manufactured in the Cerveny Kostelec plant. Also in the second half of 2007, the installation and testing of these new assembly lines was completed, and the two lines started production. Today, the company has about 7,000 m² of manufacturing space, employs 160 people, and covers all major gear-making technologies, heat treatment and painting of the final products.

The holding company Lucefin, whose steel division is one of the world’s major producers of cold-drawn steel, established a subsidiary in the Czech Republic in 2001, on the site of the former Poldi Kladno steelworks. The group’s Trafil Czech production unit is ideally located in the heart of Europe to supply customers in Central, Northern and Eastern Europe. Total investment in the project has reached EUR 10 million so far. Trial operation with 25 employees started there in 2007. In future, the plant will employ up to 60 people.

SIAD, a leading European producer of technical and special gases, entered the Czech market in 1991. To satisfy ever growing demand, the company opened a manufacturing and filling facility in Braňany near Most in 1998. Another facility was built in Rajhradice near Brno. Furthermore, the company has a network of more than 150 distribution warehouses in the Czech Republic.

The services sector

Italian investment is not limited to manufacturing. UniCredit bank has become one of the major players in the Czech financial services sector following its acquisition of HVB. Banco Popolare also has a network in the Czech Republic. Generali is one of the major insurers operating in the country.

Roughly 25 Italian-owned firms are active in real estate consulting, real estate development or construction services. The largest of these is the Czech branch of the Manghi Group. Other Czech companies established by Italians include law, consulting and accounting firms, as well as restaurants, hotels and travel agencies.

 The company Bioster provides a less common service – gas sterilisation of medical devices – in its facility in Velká Bíteš, a town located on the Prague-Brno motorway. The facility was opened in July 2005. Bioster has a sister company in Slovakia.

Italy has the reputation of a country with many small family-owned firms and it is thus not surprising that many Italian-owned firms in the Czech Republic were set up and are owned by individuals rather than by companies. As it would be impossible to publish a comprehensive list of these ventures here, two examples are given to illustrate investment opportunities in the Czech Republic.

Antonio Pacsuale set up the mineral-water bottling company Karlovarské minerální vody in the early 1990s. The company has a major share of the Czech market with its Mattoni brand name. The Czech cheese manufacturer Orrero was supported at its inception in 1996 by a group of Italian private investors. The company’s products include Gran Moravia parmesan-type hard cheese, which is exported to a number of countries, including Italy.

Great investment opportunities

The above examples show that there are many investment opportunities for Italian companies and entrepreneurs in the Czech Republic. Privatisation may be over but the Czech economy has been growing at a rate of 5-6% in the past few years, creating demand for new products and services. For many Italian companies, their subsidiaries in the Czech Republic have served as a springboard to markets in neighbouring countries and/or countries farther afield in Eastern or Northern Europe. Italian investors can take advantage of the Czech Republic’s favourable location and well-developed transportation links with those countries.

Useful contacts:

Italian Embassy in Prague
www.ambpraga.esteri.it
info@ambpraga.it

ICE – Instituto Commercio Estero
www.italtrade.com
praga@praga.ide.it

Italian-Czech Chamber of Commerce and Industry
www.camic.cz
info@camic.cz

Czech Embassy in Rome
www.mzv.cz/rome

CzechTrade’s office in Milan
/www.czechtradeoffices.com/it/italia/

Italian manufacturing investments