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Frost & Sullivan Sees Hope for the Russian Genset Market Despite Downturn - Since 2000, Russia has been one of the world's top performing markets for gensets manufactures, witnessing an average growth rate of around 15% in the past five years
Frost & Sullivan Sees Hope for the Russian Genset Market Despite Downturn

 

NewswireToday - /newswire/ - London, United Kingdom, 2009/02/11 - Since 2000, Russia has been one of the world's top performing markets for gensets manufactures, witnessing an average growth rate of around 15% in the past five years.

   
 
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The demand for new units increased year-on–year, making 2008 a profitable year, with a growth of 14.2% as compared to 2007. However, manufacturers began to notice the negative effects of the global economic crisis towards the end of the year. In general, the industrial output fell 10.8% in November as compared to the previous month and 8% on a year-on-year basis. Presently manufacturers are predicting depressing losses for 2009. Though this may discourage investors, Frost & Sullivan believes that these losses will be experienced only in the short term, with gains in the long run at a considerably lower level than five years ago, but nonetheless maintaining a stable rate of 9-12% growth per annum.

"While mainstream perception of the genset market is that the industry is heading for a sharp slowdown, it seems that the pessimistic picture is more complex and some positive elements have been overlooked. Undoubtedly, the boom in the market has been significantly shaken and companies are currently reporting declining orders and massive lay-offs, but we still believe that Russia and its genset market emerge as a strong investment candidate in the long run and presents several growth opportunities," reports Maciej Jeziorski, a research analyst for Frost & Sullivan.

The economic crisis and its potential fallout will not stop Russia from growth. However bleak current circumstances may seem, the future holds immense possibilities, especially in emerging consumer groups, the healthcare sector, the oil and gas industry, the defence sector, and transportation infrastructure.

The 'emerging middle class' in Russia has grown considerably and developed an appetite for new products and services. As this segment grows, so does its purchasing power, and thus new shopping malls and retail stores will rise to supply their wants. As this is occurring, genset, as a source of backup power, becomes absolutely essential.

As Russia's healthcare sector is undergoing a significant change and private medical services are becoming more established, the need for genset to backup hospital's power supply grows. With 8,750 hospitals in 2005, the Russian healthcare sector is one of the fastest growing markets worldwide. Resultantly, this particular market in Russia is worth monitoring.

One of the biggest end-users of gensets is the oil and gas industry. Russia is the second largest oil exporter in the world and the EU depends on Russia for its oil and gas. This sector has plenty of room for growth. In 2008, Russia passed a $50 billion corporate bailout fund of which $9 billion has been set aside for the oil and gas industry. As the oil and gas sector accounts for around 60% of the genset revenues in this market, the bailout fund is expected to provide some relief.

The defence industry is also showing promise for genset demand. The Russian Prime Minister recently declared a 27% increase in spending on 'power departments in 2009', which translates into $94.1 billion. Of this fund, 50% will go to the Defence Department. Cooperation between the genset and defence market players has been traditionally strong and participants have established a good network of personal contacts. Still, given the size of the investment proposed, this could be an interesting sector to keep an eye on.

Finally, infrastructure development is another opportunistic area for growth. The Russian government is going to spend close to $549 billion on transportation infrastructure; plans should be well underway by 2015. This will be a perfect opportunity for genset manufacturers due to the expected increased demand for backup and continuous power.

Maciej Jeziorski closes saying, "Investors should put a brave face to the current crunch, underlying that it is simply a temporary setback, and should continue investing in this country. In the short term, gensets market is expected to considerably slow down (the market might even decrease in comparison to the previous year) due to poor industrial output and the present limitations of credit. In the long run, growth after the slowdown is expected to start rising again, but at a considerably lower level than five years ago and stay at a stable rate of 9-12% per annum. The crisis and its consequences will not stop Russia from growing and a new wave of orders for gensets can be expected in the not too distant future."

For more questions about the European Genset Market, or the Russian Market, please contact Chiara Carella at chiara.carella[.]frost.com.

GIL 2009: Europe

Frost & Sullivan has expanded its flagship Global Congress on Corporate Growth - GIL Global - into several major cities around the world including London. For the first time ever in Europe, Frost & Sullivan will be hosting the Growth, Innovation and Leadership Congress 'GIL 2009: Europe' on 19-20 May, at the Sofitel St James in London. GIL Global is the industry's only event designed to support senior executives in their efforts to achieve sustainable, top-line growth. To register, obtain a programme agenda, explore sponsorship opportunities, or attend as a member of the media for GIL 2009: Europe, please contact Chiara Carella, Head of Corporate Communications for Frost & Sullivan in Europe, at chiara.carella[.]frost.com. One-on-One interviews with Frost & Sullivan senior growth consultants are also being scheduled.

About Frost & Sullivan
Frost & Sullivan (frost.com), the Growth Partnership Company, enables clients to accelerate growth and achieve best in class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best practice models to drive the generation, evaluation and implementation of powerful growth strategies. Frost & Sullivan leverages over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from 31 offices on six continents.

 
 
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Frost & Sullivan Sees Hope for the Russian Genset Market Despite Downturn

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Publisher Contact: Chiara Carella 
+44 (0) 207 3438314 chiara.carella[.]frost.com
 
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