Carpatcement Holding talks concrete plans on a wobbly market

The local cement market has fallen by about 15 percent this year and local players say they are not holding out high hopes for 2011 either. Against this backdrop, Florian Aldea, the new general manager of Carpatcement Holding, says he intends to further consolidate his company’s position and told Business Review some of his plans.

Simona Bazavan

You take the helm of Carpatcement Holding at a difficult moment for the local constructions materials’ market. What are your plans for the company and what do you think will be the biggest challenges ahead?

In spite of the difficult economic context, which affects us all, I know I take the helm of a company with a solid position on the market, a company made up of professionals and with a well established name in the local business environment for many years now.

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As a general target, together with the management team I plan to continue to consolidate and develop the position that Carpatcement Holding currently has on the market. This is something I have been working on for the past few years as previously I served as general manager of Carpat Beton, the concrete division of HeidelbergCement. The strategy regards all of the company’s business lines: cement, concrete and aggregates. On the medium term, one of my priorities is to develop the concrete and aggregates divisions in order to better respond to our clients’ and partners’ needs.

How has the local market evolved in 2010 compared to the previous year and what are your expectations for 2011?

We estimate that this year there will be a 10-15 percent decline in cement sales in Romania compared to 2009. This is something that was triggered both by the overall economic recession and the macroeconomic and political instability, as well as by the reduced chances of realizing the large-scale infrastructure projects previously announced. If we have a harsh winter, the drop could be even more considerable.

We believe that next year the market should see a slight increase if there is political stability and the government’s much needed austerity measures bear fruit. But most likely, only in 2012 will we be able to talk about healthy growth rates for the local market. Compared to many other countries there are still many opportunities and also high investment needs.

When talking about the effects of the crisis and its recovery potential, is the Romanian market different from other countries in the region?

The Romanian market has some particularities that are at the same time both setbacks and advantages. On the less favorable side, the new economic context did not allow us the necessary time to address some of the structural issues that we are still facing. The full half of the glass is that being less connected to the European economy we were also less affected by the crisis than Western markets.

The local cement market is, nevertheless, in spite of internal factors such as the lack of macroeconomic stability, more stable than other markets and it also has a higher potential for growth because of the need for investments. The Romanian per capita cement consumption of only approximately 300 kg annually is one of the lowest in Europe, where the average is 400-500 kg. And there are countries that reach an 800 kg yearly per capita cement consumption.

What is Carpatcement’s estimated turnover for 2010 and how does it compare to the previous year?

As we are part of the local economy, the company is connected to the trends on the local market. For 2010 we estimate a decrease of approximately 10 percent against the previous year when the turnover for all three divisions reached about EUR 240 million.

What strategies have you implemented to counteract the decreasing market, and what are your plans for 2011?

We can say that we have acted very cautiously as a company ever since 2008 when the first signs of the crisis appeared. As an action plan, we have closely monitored all costs and cash flows in order to streamline internal costs. For the same purpose we have reduced expenses to cut non-productive costs and maintain efficiency indicators between reasonable margins. The strategy has proved successful as we have managed to reduce expenses by about 10-15 percent.

Preserving a solid position was also possible through relations built over time with our clients and suppliers and the fact that we are part of one of the largest world groups active on the construction materials’ market, German HeidelbergCement.

Is Romania an important market for HeidelbergCement? What is the share of Carpatcement Holding in the group’s turnover?

HeidelbergCement runs operations from America to Asia. Romania doesn’t have a significant share – below 3 percent by volume – but the share of each country is directly related to its development stage and the scale of the investment projects it undertakes.

What was the company’s investment budget this year and what are the plans for 2011?

This year we have invested approximately EUR 8 million in various production-related projects and mainly in modernizing the equipment. Nevertheless, we have a flexible budget structure in case new opportunities appear. For 2011 we have planned a similar amount.