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Sticking to his own path

Exports will be key to the revival of Romania’s economy - and building material producer Den Braven’s Adrian State believes he can show a shining example of this in a post-boom market. Profile by Andreea Ceasar

April 2011 - From the Print Edition

In 2010, Romania registered the fourth highest export growth rate in the EU - with exports returning to the same levels in 2008, when the country was still in the midst of a boom.
This upswing will be key to the development of the country - and it shows that Romanian companies have taken advantage of the drop in the value of the local currency to exploit the export potential of manufactured goods, rather than depend on a niche market at home.
Dutch polyurethane foam and adhesives producer Den Braven Romania has followed a similar pattern.
After building its first production site in Romania in 2007, the company started to export its products on a worldwide scale, with over 50 per cent of total production now set for over the border. The results are coming home - Den Braven Romania expects to double its total sales in three years.
Adrian State, general manager of Den Braven Romania, has always believed in the potential of the cross-border construction market. Back in 1998, Den Braven was only importing products, but State believed that a production site would be necessary.
By 2006 the Romanian division became the most profitable at the group level of over 100 countries, in terms of sales per capita and national GDP.
At that moment, group owner Kees den Braven was looking to the Hungarian market as a location to invest seven million Euro in a factory.
“Ever since I have started working for Den Braven I was aspiring for a production site,” says State. “The only advantages I could offer to the group was my style of doing business and the figures recorded by the subsidiary, while in Hungary the authorities offered to fund half of the investment.”
State managed to help organise the construction of the first new production factory in Buftea near Bucharest. In exchange, he promised to increase the market share and to develop a regional production base.
However at that moment Romanian authorities were not forthcoming with support for a medium-sized manufacturing site. One member of Romania’s Agency for Foreign Investments (ARIS) told investors from the beginning that if they were looking for incentives, none would come.
“Even though the authorities did not care about this investment, they should have reacted in another way,” says State. “They represent the link between the state and the investors, but they don’t have a clue how to manage this.”
State stresses that there should be incentives for investments of less then 50 million Euro. “There are cases in which you don’t need to invest 50 million Euro but still have an important business investment,” he says. “In our case, the group invested in three years over 20 million Euro and has not received anything back in return.”

China: the new frontier

Since 2007, when the factory started producing, Den Braven Romania increased its market share and sales, while exports boomed.
Now Den Braven Romania exports products to over 32 countries. In 2010 the company’s exports increased by 62.7 per cent in comparison to 2009, up to a total value of 19.6 million Euro, of which 17.2 million was generated by polyurethane foam. The main sales were to Poland, Austria, Italy, the Czech Republic and Slovakia. In 2010 the company entered the Vietnam, Argentina and Lithuania markets. The next frontier for Den Braven is China, a country which is in need of more then 20 such factories, according to State.
Part of this success is due to private labels. The Dutch subsidiary is now producing for more then 200 private labels for 30 different countries. In Romania, it produces for 30 private labels.

Testing thieves

Having trustworthy employees is a problem for many companies in Romania. Last February State discovered that one of his cashiers had been stealing for more than 18 months at a rate of 200 Euro a day. Meanwhile in 2009 he caught one employee stealing more than 70,000 Euro, while another absconded with all the company’s databases to a competitor.
In five years, Den Braven has spent 30,000 Euro on polygraph ‘lie-detecting’ tests on its employees or job candidates. More than 500 employees and candidates have been tested and the main question of the test is: “Have you stolen from your former employer?”.
The CEO accepts that admitting the use of this practice has put him and his company in a bad light, but he argues that cases of theft have decreased.
“It is the best method, statistically speaking, which allows a company to test the honesty of its employees,” says State.
Meanwhile another problem for building materials companies is maintaining liquidity. The general manager has selected more carefully the company’s clients and had to give up some firms because there were no guarantees that they could pay their invoices.
“I did not choose or make a list of debtors,” he says. “Starting in 2008 our main distributors have vanished because they have spent their money on real estate investments. That was the moment when I decided that we should start a new habit - to ask our clients to pay up.”

Doubling growth

Last year private-equity firms Egeria and Wagram acquired 100 per cent of the Den Braven Group from the founding family. According to State, when representatives evaluated the group’s actives, the value of the company increased by more 20 million Euro due to the investment made in the Romanian factory.
State has retained his position, resisted any change and has forecast for the next three years a doubling of the existing turnover to 60 million Euro. This target was imposed not by the new investors, but was State’s personal goal.
Den Braven`s local budget for 2011 took into consideration the same level of exports as in 2010 and an increase of ten per cent for Romania. The increase will not be due to a return of the boom of 2005 to 2008, but due to an expected increased market share. “We wanted to be prudent, which is why we didn’t want to take into consideration the increase of 50 per cent of exports of last year,” says State. “Our local competitors don’t have a chance, as they depend on imports.”
Den Braven Romania recorded total sales of 39.5 million Euro in 2010, an increase of 28 per cent in comparison with 2009, even though the construction market suffered a 14.4 per cent decrease and the building materials market dropped by 15 per cent. ■

Who is Adrian State?

After studying fine arts at Nicolae Tonitza high school in Bucharest, Adrian State felt that the potential of engineering was greater, so graduated in Machine Construction Technology in 1983 in the capital.
During Ceausescu`s dictatorship, his first job was as chief projecting engineer at the Construction Material Company in Calarasi.
In the 1990s, he went to his first job interview, where the only request was for the candidate to have leadership qualities - although he did not know who the company was. It turned out to be sweet and savoury patisserie chain Pani Pat.
“If I had known that I was going to work at Pani Pat, I would have never gone there - I was proud to be an engineer and did not know anything about pastry,” says State. “I was convinced to stay with a leading position and developed the company. When I left the company was franchising its name and brand and was extending to 25 cities.”
In 1998, State was employed as general sales manager for Den Braven Romania with a basic salary of 400 USD plus commission. “I believed in the potential of the company so I agreed to the minimum basic salary and the highest per cent for commissions.” he says. In 2001 he became general manager of the Romanian subsidiary.

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