Cemacon: from the brink to nationwide number two

Liviu Stoleru, general manager of Cemacon, tells Business Review the story behind the company’s current position on the Romania market and explains the turnaround strategy that led to it.

By Anda Sebesi

What is the story behind the Cemacon business?

Cemacon is probably one of the few success stories of a Romanian company in distress. Looking back, we are talking about a company founded in 1969, in Zalau, a state-owned company privatized in 1991. In 1996, the company was listed at the Bucharest Stock Exchange and in 1999 it became a 100 percent privately owned company.

As the construction market increased significantly every year until 2008, its position on the market was guaranteed by strong demand. Because the business had major growth potential, the management team at that time decided to apply for a EUR 26 million loan to build a new factory, with new technology and greater production capacity. The economic crisis followed and repayment of the debt became a major issue. In 2010 when joining the company, I found it in a rather difficult situation. Insolvency was pretty close.

My main concern was saving the business, even though we faced rough market conditions and, moreover, a stiff and hostile organization. For this to happen, a major restructuring was needed. There was a battle to get those responsible to understand – the union, workers, the old management and the investors. We then started what proved to be the most effective financial and operational business turnaround of a Romanian company. Today, Cemacon is a stable, reliable, high-performing, profitable and expanding business.

Recently Cemacon was the winner of the Best Turnaround Strategy category at the Business Review Gala Awards. What did this strategy consist of?

When I arrived at Cemacon, five years ago, I found a dangerous situation that was threatening the entire business. I saw potential, and I came up with a turnaround strategy, implemented with the support of a visionary management team. The plan included two types of measures, operational and financial restructuring, and started in January 2011.

The operational turnaround involved changing the entire entrepreneurship pattern, bringing on board a brand new management team with vision, consisting of young but accomplished professionals, with great expertise. We had to cut some administrative and operating costs as well. The Zalau factory was closed and the entire production was moved to the Recea facility, where we now use the most modern and advanced automatic production line in South-Eastern Europe. We renegotiated the strategic supplier contracts and optimized the direct production costs by innovating in terms of distribution and technological implementation. A new portfolio, consisting of the most modern bricks on the Romanian market, was launched in 2013. Cemacon was repositioned on the market with a new identity and marketing strategy. The rebranding process was one of a kind on the construction market, while the competition was fighting for low prices and undertaking major cost cutting. The distribution network was expanded from ten distributors in three nearby counties to a national network consisting of more than 250 points in 30 counties.

The financial restructuring was necessary to find a solution to ease the debt repayment. But in order to initiate discussions with the bank we had to prove operational performance. After initiating the operational turnover, we were able to show the bank Cemacon’s new path. They understood the difficulties brought about by the crisis and saw that the company had applied emergency measures to save the business. Not only was the bank convinced, but investors began to be interested in Cemacon. In 2013, the KJK Investment Fund became a shareholder.

In 2014, Cemacon reached a new level of business; we strengthened the company and established a new foundation for growth and development. In a constricted market, we achieved spectacular growth, with a 31 percent increase in gross turnover and 43 percent increase in operating profit on 2013. In four years, Cemacon was transformed from a local player into the most innovative and competitive producer of ceramic blocks nationwide. From eighth place in the ranking, we climbed to third place; we increased turnover from EUR 5 million to EUR 14 million and market share from 6.7 percent to 17 percent.

Last month the financial restructuring came to an end, with the signing of new loan contracts with the financing bank. Cemacon now has a debt that can be sustained by core activity and is the second largest Romanian brick producer, after reopening the factory in Zalau, which increases our production capacity by 33 percent.

In your opinion, what are the main factors behind the company’s current position?

Apart from the efficient business strategies applied, there were other factors. Cemacon’s product portfolio is unique on the Romanian construction market. Every product offers advantages to the developer, construction team or beneficiaries, who can save time and money thanks to Evoceramic bricks’ dimensions and characteristics. These were the main reasons that convinced clients to use our products.

Demand exceeded our production capacity. The Recea facility reached its maximum production capacity in 2014. In March 2015 we reopened the Zalau factory in order to boost our production by 33 percent and satisfy the market’s high demand for Evoceramic products. The improving economy also boosted the residential sector. In 2014, the market increased by 8 percent on 2013 and in 2015 we estimate a higher increase of 13-15 percent.

What are the main outcomes posted by Cemacon as the result of the implementation of its turnaround strategy?

In the last four years, the company’s turnover has posted a total increase of over 250 percent, and the company reported operational profit, at a high rate for this industry, of 19 percent in 2014. While the masonry market is down by 40 percent on 2008, Cemacon’s production capacity has increased every year since 2008 and reached its maximum last year.

In 2014, Cemacon posted the biggest jump in the construction materials market, with a turnover of EUR 13.5 million, or 31 percent more than at the end of 2013. All our operational and financial results convinced the bank that Cemacon is not just a client, but a reliable partner.

What are the company’s plans?

It’s time for strategic investments to boost our results and reach our objectives. In 2015 we will invest about EUR 1 million to increase and optimize production. We will focus on reducing production costs and developing the Evoceramic range. With the Zalau facility operational, Cemacon becomes Transylvania’s main brick producer and the second largest at national level.

About Cemacon

Field of activity: National producer of ceramic blocks

Number of employees: over 150

2014 turnover: over EUR 13.5 million

2015 estimated turnover: 40 percent increase on 2014

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