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New investments need Government support - Doing Business | DOINGBUSINESS.RO

  |  14.11.2012

New investments need Government support

Romania is ranked as one of the cheapest producers of raw wood in the region, but still battles ailing problems that include poor logistics, dirty wood and rock damage

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And if we count that the past five years have witnessed almost half a billion Euro invested in the wood sector by European frontrunners, one might wonder why no EU money was used to subsidize the building of forest roads, for starters.


So, we’ve got the wood, what to do with it?


Romanian tastes in furniture changed in recent times, with consumers increasingly seeking modern and practical furniture, which encourages companies such as Ikea to reconsider their development and possibly to open new outlets. Kika is another multinational player which offers self-assembly furniture. Locally, strong players such as Mobexpert and Elvila are also taking a closer look at ways to attract more customers.


Hail to the new king!


On the wood processing side, the market has a new leader, as Austrian-based Holzindustrie Schweighofer has overtaken Kronospan and Egger, also Austria-based companies, but also national wood company Romsilva, which manages state-owned forests and held the local supremacy until 2010. Holzindustrie Schweighofer operates in four locations in Romania, in Sebes, Alba County, Radauti and Siret, in Suceava and Comanesti, in Bacau County.


In turn, Kronospan, which has to date invested 500 million Euro in three locations in Romania (two factories and a logistics center), expects its turnover to increase by 15 per cent this year, despite rough beginnings of the year. Egger Group focuses on developing an integrated production site in Radauti, which includes creating almost 1,000 new jobs.


Investments announced by companies active in wood processing are likely to move forward a market which already overpasses one billion Euro per year, considering the cumulated turnovers of the largest five market players, as shown by Trade Registry data. At the same time, state-owned Romsilva manages 3.4 million hectares of forests owed by the state and 1.1 million hectares of private forests, held by both local authorities and individuals. The company could be considered one of the most valuable firms in Romania, but has failed to produce spectacular results in recent years.


Retailers remain cautiously optimistic


At the beginning of the year most of the furniture industry leaders were optimistic with regards to 2012 being a growth year, considering exports, expansions or new collections that could pour life in an industry which has been quite hit by the economic crisis. At the same time, the need for cash flow has driven companies to turn to foreign markets, where the money is. 


Furniture and interior decorations retailer Ikea has overpassed the 90 million Euro mark in the September 2011 – August 2012 timeframe, up 10.8 per cent over the previous fiscal year. With these results, Ikea increases competition at the top, in an industry where the 100 million Euro mark has so far only been surpassed by Mobexpert, Elvila and Aramis Invest.


With the year now coming to an end, the local furniture market enjoys good retail sales as well as increased export moves, according to data by the Romanian Furniture Producers Association (AMPR).


Whether they are local or multinational, retailers count on sales boosts related to the winter holidays, which could lead to an overall market increase of five per cent. Furniture retailers the likes of Kika and Ikea count on such seasonal promotions to add to an already hefty business balance sheet.


Local frontrunner Mobexpert is also seeing good sales nationwide in the first three quarters of 2012, but its owner, Dan Sucu, remains cautious about further increase of his business throughout the whole year.


Nevertheless, overall consumption seems to have picked up the pace and this adds to the general optimism, as well as signs of recovery in the governmental sector, with the increase in wages for state employees. Market players hope part of the money the government gives back to its employees will eventually end up in the furniture industry.


Development was divided in several categories in the last year. Small players bet on expansion, like in the case of Campina-based Lemet. In the last few years, the firm has accessed six million Euro of European funds to expand its production facilities and for investments in a new production line. Lemet produces 1.2 million sqm of wooden boards (PAL) and 360,000 items of furniture yearly. The production plans involve over 30,000 sqm. Items under the brand “Lem’s” are sold through a current countrywide network of 102 franchised stores.


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