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Anda Todor, AmCham Romania
More attention needs to be paid to the qualitative approach, rather than quantitative»
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Trading up in the down market

Seizing the right moment to raise prices and drive up production handed Romanian building materials producer Adeplast a chance to take on rival multinationals - owner Marcel Barbut reveals to Corina Ilie

November 2010 - From the Print Edition

With the real estate market frozen and few new infrastructure projects launching, the building materials sector has seen demand plummet and losses deepen.
Companies in this sector have slashed prices, cut production or shut down their less efficient factories to keep business afloat.
However one Romanian company has seized on this period as a time to drive up market share and take on international rivals from Austria and France.
While much of the rest of the market heads for bankruptcy or prays for a steady level of orders, dry mortar and finishings producer Adeplast is posting a growth of almost one quarter for 2010.
In the previous year, the company saw a drop of only 0.6 per cent compared to the boom of 2008, in a market where the competition was losing between ten and 30 per cent.
Now, among building material producers, the company has this year climbed from third to second position.
Unlike many of its competitors, Adeplast raised prices in 2009 - but in the summer of 2010 cut prices dramatically and ramped up production to meet rising demand.
“In the first eight months of 2009 we waited to see what would happen,” says Adeplast’s 55 year-old Romanian owner Marcel Barbut. “In August we increased the prices by ten per cent, because the customer numbers dropped and the prices on cement, plaster and electric energy increased, so we had to make some profit and retain our employees.” Between June and September, the demand for construction materials is highest – yet many producers do not have enough capacity to cover the demand, especially during an extended climate of reduced production.
Therefore Adeplast saw an opportunity to become one of the most attractive suppliers in the local market by slashing prices and boosting production. “This increased our sales a lot,” says Barbut.
Adeplast was able to raise its capacity because it has two production lines in both its factories in Ploiesti (Prahova county) and in Oradea (Bihor county), which can cover the capacity of four facilities. The staff worked in three shifts and the result was that the firm increased revenues by three per cent, after a 40 per cent decline in the first half of the year. “People trust us because we can deliver high volumes very fast,” says Barbut.
While Adeplast’s mortar business dropped 31.7 per cent in 2010, after the closure of many construction sites, the finishings business, including adhesives and skim coats, increased by 94.27 per cent.
This year Adeplast became the number two firm in its industry below Austrian mortar producer Baumit and above French producer Weber, owned by Saint Gobain. Baumit posted a 29.7 million Euro turnover at the end of 2009 and Adeplast was second with a 26.54 million Euro turnover. “Baumit, Adeplast and Weber were the only companies that made money in 2009 - the rest of the competition posted losses,” argues Barbut.
During 14 years of activity in Romania, Adeplast opened two production facilities for mortar and finishings - in the south in Ploiesti-Corlatesti and in the west in Oradea. The factory in Ploiesti has a total annual capacity of 450 million tonnes and the factory in Oradea can produce 250,000 tonnes annually. In Oradea, Adeplast also opened a paint and decorative plaster factory, with an annual capacity of 80,000 tonnes.
Up until the end of 2010, the company invested 28 million Euro in the expansion of the production capacity and in equipment. In 2010 Adeplast poured one million Euro - its entire annual profit - into its second wrapping line in Ploiesti and in increasing its electric energy capacity.

Expansion move

Barbut plans to open two more factories in the country to cover regions unexploited by his firm. The third will be located in Moldavia, although he does not reveal the location. “The demand is very high and sometimes we cannot cover it,” says Barbut. “This is why we need two more factories. Four big cement factories were built during Communism in the four main regions of the country - Moldavia, Transylvania, Muntenia and Dobrogea. We should also have the same number of factories for dry mortar.”
The Adeplast owner says the new factory in Moldavia will help his firm cut transport costs significantly – which was the strategy with his factory in Ploiesti. This will be a key contributor to the welfare of the business, as transit costs in Romania remain high.
“If we had not built the factory in Ploiesti we would have been in free fall,” says Barbut. “This helped us save two million Euro in transport costs.”
Adeplast is also building up international expansion – in the last year the firm started to export around eight to ten per cent of its products to Hungary, Italy and the Republic of Moldova. In the future, the company will target Greece and Bulgaria.
For 15 years, Romanian building material firms have been at the mercy of foreign takeovers because international groups can boast greater leverage on buying raw materials on a global scale, pricing smaller local companies out of business.
Barbut says he has received several proposals from international competitors, including Saint Gobain, but the local boss is not considering a sale in the short-term.
“Any discussion about selling the company is a mistake right now,” he says. “Even in 2009 and in 2010 we reinvested all the profit, I will start thinking about selling in 2012 or 2013, not sooner.”
Adeplast’s owner expects 2011 will be tougher for finishing materials than 2010 because there are few new buildings poised to hit the market. “In 2010 we sold products for housing delivered in 2009, but in 2011 all the producers will fight for the few dwellings built last year,” says Barbut. “However the sales of raw construction materials - such as brick and concrete - will probably explode, as some developers resume their projects.”

Who is Marcel Barbut?

Just before the Romanian Revolution of 1989, Marcel Barbut emigrated to Austria and spent seven years learning the trade in construction materials from a western perspective - specialising in dry mortar and finishings production.
“First I wanted to emigrate to Australia, because many of my ex-high school colleagues had gone there and, when they were returning to Romania, they were telling me interesting things about the country,” he says. “Austria was the first step and I liked it - which is why I spent seven years there.”
In 1996, Barbut set up Adeplast with his former boss from Austria and two other partners. “I had 96 per cent of the shares and they had four per cent, but we shared the profit equally, because I spent more time in Austria than in Romania,” explains Barbut. In 2001, he moved back to Romania and has since bought out the shares from his partners.
Married with two sons, aged 18 and 20, 55 year-old Barbut has a variety of choices for the future of his business. His 20-year-old son now studies economics in Romania and is attracted by the construction business. In theory, he could take over the management of the company when his father decides to withdraw. Last summer he worked for Adeplast to gain a taste of the factory floor. “But my sons and I all have very strong personalities,” says Barbut. “We are difficult to model in a specific way and I will not ask them to work in the company if they do not want to.”

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