Dragos Geletu, general manager and shareholder of KLG Europe Romania, says 2012 failed to confirm the expectations the company had last fall. Whereas KLG had expected a ‘lively’ 2012 at the end of 2011, with at least as strong a growth as in 2011 partly because of the elections, the European Football Championship or the Summer Olympics in London, the 2012 performance contradicted the forecasts.
“We saw an upward trend since April last year through the end of 2011, with no hiccups. It was hard to image then a 2012 worse than 2011. Yet 2012 started with a really heavy winter. Half of January and in February we had weeks when we couldn’t get to our office for days. We had people sleeping in the warehouse, we could not deliver anything,” Dragos Geletu said. “The start of the year was a disaster (…) Easter was not as lively in terms of volume as we would have expected, maybe because of the powerful impact on the winter to a certain extent. And then in the summer the political crisis started. Whatever we might say, it did affect the economy. People waited because they were not sure what to make of it.”
How did the performance of Romania’s economy in 2012 affect KLG Romania’s business? The increase in revenue slowed down from 30% in 2012 to about 10% in the first three quarters. Whereas revenue rose from EUR15.5 million to EUR20 million last year, this year, it will probably reach EUR22 million, therefore going up by less than 20%.
“We had expected growth of at least 20% on last year, after having grown by more than 30% in 2011. Considering the current economy, our growth is now about 10% on last year, but the profit rate is down. On the other hand, we continued to make investments,” Geletu said.
The investments include a new 10,000 square meter warehouse near the already existing on by the A1 highway (Bucharest-Pitesti), which cost EUR5 million, a new 5,000 square meter storage facility in the free trade zone of the Constanta Harbor, estimated at EUR3 million or EUR4 million and the acquisition of 100 new trucks.
KLG’s investment plans come after two local carriers went insolvent this year. The first was edy International Spedition, the largest local road carrier with a fleet of 1,100 trucks, along with the other three companies in the edy group, including edy Logistics, which are now being reorganized and the second was Transchim, one of the oldest carriers in Romania, established in 1980.
KLG set up a new company, KLG Trucking, to be able to provide road transport services.
“We already 20 trucks purchased, we’ll buy 20 more soon and we want to reach 100 by next spring. We will use those for international transport. We already have orders from abroad and we’ll work in Europe, between Netherlands and France, in Benelux, UK, Spain and Scandinavia. We will not compete with KLG Netherlands because they will be among our customers,” Dragos Geletu said.
He added the company chose to pay the trucks in cash instead of borrowing the money to pay for them, to preserve financial stability.
As some of its clients reduced their warehousing space by as much as 70% compared with 2011, the company expanded into distribution, thus gaining smaller clients, too.
“Until a few years ago, the growth of many companies used to come partly from new business and partly from existing business. Lately, growth has been coming only from new business. We did not see an increase in volume from any of our existing clients. We had not expected such a thing. And they not only did not increase, but declined and we had to make up with distribution, with smaller clients,” Geletu said.
(English version by Loredana Fratila-Cristescu)