The main challenge of the companies in this business is the thawing up of lending for new construction projects, writes Business Construct magazine.
The local ceramic tiling market witnessed a 5% to 10% decline in 2012 compared with 2011 to EUR110 million – EUR115 million and a volume of 23 million to 25 million square meters, according to the estimates of KAI Group, a Bulgarian manufacturer owned by private equity firm Advent International.
“We believe the market hit bottom, staying at 25 million square meters for several years, with fluctuations of plus or minus 10%. We expect slight growth this year, of 5% to 10% on 2012,” said Catalin Rotaru, country manager of the local unit KAI Ceramics.
He added the positive signs about the sales of ceramic tiles came in the first quarter, considering the good weather and the lack of heavy snowfall.
“We hope to see greater economic and political stability this year, which should positively influence the restart of new construction projects,” Rotaru says.
Lucian Azoitei, general manager of Pazo, a group specializing in wall and floor tiling and sanitary ware distribution, says the local sector has been relatively stable for about two years now, with a slight downward trend.
Still, Azoitei estimates the market might increase in 2013, though by no more than 3% to 5%.
“We are now at the bottom of the market driven by local consumption; without a development and diversification of the real estate market and especially of the residential market, I don’t see any significant increase of the ceramic tile market.”
Pazo group posted about EUR6.1 million revenue last year, up 60% on 2011.
The group’s officials say this was because of changes in the sector, where some competitors disappeared and some major players went insolvent or bankrupt, which enabled Pazo to win a number of new contracts.
Pazo expects growth of 20% for its 2013 revenue. Pazo group comprises Pazo (wall and floor tiling distributor), Terraform (flooring installation services) and Devon Classic Design (which sells Devon & Devon sanitary ware).
Sales of ceramic wall and floor tiles generate some 60% of Pazo Group’s revenue, while flooring installation services generate 30% and the rest comes from sales of home furnishing products.
Pazo Group was one of the first companies to import ceramic tiling in Romania and was established by Lucian Azoitei and Cosmin Paun in 2002. The group distributes Italian-made Marazzi tiles.
Azoitei says the ceramic tile market is highly polarized, with a medium to lower residential area where buying choices are price driven and an upper residential and major project area, where acquisition is based on technical criteria and look.
The former type of customer buys small colorful tiles, while the latter’s purchases are in line with the international trends: large dull colored tiles, imitation wood and porcelain floor tiles, says Azoitei, adding the trend has not changed in the last four years.
This rising demand for such tiles made Austria’s Lasselsberger, which owns Cesarom start making porcelain floor tiles in its plant in Cluj-Napoca (NW Romania) in May.
“We decided to start making porcelain tiles because of the constantly rising demand,” said Toni Teau, general manager of Lasselsberger Romania.
Porcelain floor tiles generate about 28% of the floor tiling sales in Romania and the percentage will only increase in the next three years, Teau added.
Lasselsberger SA posted about 83.2 million lei (EUR19 million) revenue in 2011, while Sanex, its other business in Romania, posted RON94.9 million revenue, according to Finance Ministry data. The Austrian group owns 67.93% in Sanex.
Lasselsberger only has one tile plant in Romania after closing Cesarom Bucuresti and Mondial Lugoj. Its annual production capacity stands at 6.7 million square meters and it sells its products via 100 partners.
KAI Ceramics’ Rotaru says the main challenge of the ceramic tile market is the lack of financing that affects buying or building new homes.
“The only it can thaw up is to cut interests on bank loans to individuals and offer more lenient granting terms when it comes to collateral or government-backed projects like the ‘First Home’.”
KAI owns two plants in Bulgaria with a capacity of more than 20 million square meters a year.
The company posted about EUR20 million sales in Romania, which includes both the revenue of the Romanian subsidiary and the direct sales from Bulgaria to Romania.
“We expect more than EUR25 million revenue for 2013, up 20% to 25% on 2012,” Rotaru said.
The local ceramic floor and wall tiling competitors also include Ceramic Lazar and several companies that import wall and floor tiling from Spain, Italy and China. (EUR1=RON4.459)
(English version by Loredana Fratila-Cristescu)