Sustainable growth in the residential sector and in the ceramic wall and floor tile business for that matter will only come in 2015 at best, producers and importers thereof say.
After a good start to the year the tiling market returned to decline, companies in this business say.
“The tile market showed signs of growth in the first four months of 2013 and then a slight decline. At the moment we cannot be talking about a stable trend of the market nor of consumer spending,” says Sergiu Apolzan, sales and marketing manager of Lasselsberger Romania, the subsidiary of the Austrian group by the same name, which owns the Cesarom brand.
The local wall and floor tiling market amounts to some EUR110 million to EUR120 million or 23 million to 25 million square meters in volume.
The wall and floor tiling market went down 5% to 10% in the first eight months, says Lucian Azoitei, general manager of Pazo, a wholesaler of tiling and sanitary ware.
“The market declined (…) as a result of the lack of large scale projects and the drop in residential investments,” Azoitei explains.
The ceramic tile sector is heavily polarized, he says, divided between a ‘medium to low residential area’ where buying choices are made on price above all and an ‘upper and major project residential area’, where the choice is based on technical criteria and appearance.
Low-cost tiling accounts for 41% of the total sales, medium-priced tiles for 49% and premium tiles for 10%, according to Lasselsberger estimates.
Full-year 2013 estimates point to flat sales in volume and lower sales in value.
“We expect the market volume to remain unchanged in 2013 from 2012 and a slight decline in value, considering the heavy price pressure from customers,” says Catalin Rotaru, country manager for KAI Ceramics, the local division of KAI Group, a Bulgarian wall and floor tile maker controlled by US private equity fund Advent International.
KAI owns two plants in Bulgaria, with an installed capacity of more than 20 million square meters a year. The plants are about 140 kilometers away from Bucharest. It started a tile production line with a capacity 2.5 million square meters in Bulgaria in May, after an over EUR2.5 million investment.
The company posted about EUR20 million sales in Romaia last year, which includes both the revenue of the Romanian subsidiary and the direct sales from Bulgaria to Romania. Finance Ministry data show EUR10.8 million revenue for Kai Ceramics in 2012.
The residential sector with both new developments and renovations is the main sector that uses ceramic tiles in Romania in 2013 and consumption is directly influenced by the access to loans, especially when it comes to new construction projects and limited because of the lack of economic policies to encourage consumer spending, says Lasselsberger’s Apolzan.
Lasselsberger SA and Sanex, the two companies Lasselsberger uses for its operations in Romania posted about EUR40 million revenue last year and expect revenue to be flat in 2013.
Lasselsberger has only one ceramic tile plant in Cluj, after closing Cesarom Bucuresti and Mondial Lugoj. Its annual production capacity stands at 6.7 million square meters and it began making porcelain floor tiles at its Cluj-Napoca plant in May.
Pazo Group’s Lucian Azoitei says there are no growth prospects for the residential sector at the moment.
“As this is a market where results start showing two years after the beginning of the projects, the lack of positive prospects this year makes me think we will not see double-digit growth until 2015.”
Pazo posted about EUR6.1 million revenue in 2012, up 60% on 2011.
Pazo includes Pazo (wholesaler of wall and floor tiles), Terraform (flooring installation specialist) and Devon Classic Design (which sells Devon & Devon sanitary ware).
Ceramic tiles generate some 60% of Pazo Group’s sales, while flooring installation contributes another 30%.
Other competitors are Ceramica Lazar and importers of wall and floor tiling from Spain, Italy and China.
Locally made wall and floor tiling accounts for about 25% of total sales, while imports generate the rest, according to KAI Ceramics estimates.
(English version by Loredana Fratila-Cristescu)