An insolvent Oltchim, a Mechel using only one plant of three and an Arcelor Mittal whose production is less than half of the 2007 level mean Romania’s industry is in decline.
Moreover, industrial output, one of the most important indicators of the performance of a specific economy ran out of steam last year. After two years of growth, it was flat in the first eleven months of 2012.
Still, the country’s largest home appliances maker Arctic Gaesti (southern Romania) has been posting growth of 10% to 20% in each of the last few years despite the decline of its home market, the drop in consumer spending and the EU market still hurting from the crisis.
The refrigerator manufacturer made EUR277 million euro revenue last year, relying on exports to a number of less traditional markets outside the EU for growth. One of those is Turkey, where Arcelik, the group that bought Arctic more than a decade ago, is based.
Turkey was Europe’s growth driver in 2011 after its economy increased by 8.5%. Although it slowed down in 2012, it is expected to rebound this year.
“Arctic’s main export markets are Turkey, Spain, Poland, South Africa, Ukraine, Italy, Iraq, Germany, UK and France. More than 80% of the production in Gaesti is exported,” explained Monica Iavorschi, the company’s general manager on ZF Live on Wednesday.
One of the latest markets Arctic tapped into is South Africa, where its owner, Arcelik bought the leading home appliances manufacturer.
At a time when more and more companies are betting on services and consumer businesses, Arctic is one of the few local manufacturers still standing after decades on the market. It even increased the production of its plant in Gaesti to 1.65 million units a year, five times the pre 1989 level. Arctic makes chest freezers and vertical refrigerators, and the latter account for the bulk of its production.
Moreover, since it operated at capacity in 2012, Arctic will also invest in a new assembly line to boost capacity by 30%.
The increase in sales over the last few years that made it operate at capacity was driven by exports. More than 75% of Romania’s exports go to EU countries, rendering the local economy really vulnerable. Artic offset some of the risk by going to markets outside the EU.
“Last year was very good for Arctic’s business. The sales rose by 20% (according to internal figures i.e.), which is a remarkable performance. Our advantage is that we are exporters, which explains the results,” Monica Iavorschi said.
The revenue includes sales of refrigerating equipment made in Gaesti (Arctic and Beko fridges) and sales of home appliances (washing machines, stoves and dishwashers) made in the other plants of Arctic’s Turkish owner.
The company sells Arctic-branded products only on its home market, while Beko-branded products are sold both in Romania and exported.
The Gaesti-made appliances generate 85% to 90% of its revenue and the products made in other plants of the group and imported in Romania generate the rest.
Arctic grew its business at a time of decline for the home appliances market, 2012, which came after two years of tentative rebound.
The home appliances market was one of the worst hit by the crisis in 2009. Consumer loans, which used to fund more than 70% of the home appliances and computer products dried out, so people only bought refrigerators and washing machines when their old ones broke down.
The large and small home appliances market amounted to EUR279 million according to GFK Temax data, down more than 7% on 2011.
Arctic weathered the decline with its export policy.
“Exports went up 25%. We are now a major exporter, more than 80% of our production is exported, and reached capacity. We need production capacity. This is unusual for Romania.”
(English version by Loredana Fratila-Cristescu)