Accelerated growth
Radpol, a Człuchów-based producer of heat-shrinkable materials, has signed a contract with the Russian Institute of Nuclear Physics for the delivery of a 4.5 megavolt (MeV) electron accelerator. Complementing the accelerator the firm already possesses, the new accelerator, scheduled to begin operating in early Q4 2008, will more than double the company's production capacity. This will allow the company to enrich its product offer and enable it to enter new segments of the market, such as lignite mining, gas-works, the electronic and automotive industries.
Paweł Burzyński, an analyst from DM BZWBK, says the company's accelerator is what gives it an edge over the competition. "Thanks to the advanced technology used, Radpol's products boast special technical parameters - an idication of higher quality compared to products made of common materials, like those of the company's competitors," Burzyński says.
The new accelerator will cost some zł.17 million, part of which will be covered by a technology loan granted from EU funds. "We are going to co-finance the purchase of the accelerator with funds raised from the initial public share offer," says Andrzej Sielski, president of Radpol.
IPO allocations
Some zł.10 million of the capital acquired from the debut will be spent on the new facility, but the company wants to obtain a total of between zł.60-80 million. Radpol plans to offer around 5.6 million series-A shares and 6.3 million series-B shares. Out of the total issue, almost 20 percent will go to individual investors and the remaining 80 percent is to be designated for institutional investors. Around 50.2 percent of Radpol's shares will be floated in the IPO.
"We are going to debut on the Warsaw Stock Exchange in May. Our aim is to remain the leader among producers of heat-shrinkable materials for the electrical-energy industry. Our debut will enable us to oversee further dynamic growth. We are planning to invest in technology, R&D and to expand on EU markets," says Sielski.
Between 2007-2010, the company wants to invest zł.59.2 million, out of which zł.41.3 million will be raised from the market. Apart from the zł.10 million designated for the new accelerator, Radpol plans to spend zł.11.6 million on the modernization of its existing production line and around zł.5 million will be used to increase working capital.
All these investments will enhance the company's organic growth, but Radpol also wants to develop itself through takeovers. Hence, a minimum zł.7.7 million will be designated for acquisitions. According to its issue prospectus, the heat-shrinkable materials producer wants to buy companies whose offer would complement Radpol's, or possibly a construction firm.
Staying on top
Sielski believes that investing in innovative products and modern technologies in the sector is critical for his firm's future. "Such investments give us a chance for further growth and enable us to maintain the leading position on the market," he adds.
Currently, the company's leading position on the Polish market is secure. Last year the sale of heat-shrinkable products accounted for 49.4 percent of revenues, and the firm's portfolio in this market includes almost 600 products.
"We are the only company that produces heat-shrinkable pipes from polyethylenes using the radiation method. Our share of the heat-shrinkable products market is estimated at 50-70 percent. We are also a leading producer of cable accessories," says Sielski.
The firm's share of the heating-components market is around six to seven percent and, according to Sielski, the firm's new accelerator will eventually enable the company to produce a greater number of products and to introduce new ones.
Mastering markets
Radpol's president sees strong prospects for his firm in the near future. "The market will further develop. It is inextricably connected with the construction market, which is dynamically growing. The consumption of heat-shrinkable materials could grow even faster because we have to factor in modernization of old buildings," says Sielski.
According to ASM - Market Research and Analysis Centre, the construction market grew at 17.5 percent last year compared to 2005. Estimates for 2007 show an increase of another 15.3 percent.
BZWBK's Burzyński agrees that the company should benefit from further growth on the construction market in Poland. "We expect dynamically increasing investment in the civil-engineering sector, which requires Radpol's products. This should translate into an increase in the company's operations and profits," he says.
Radpol, however, does not only want to concentrate on the domestic market. Last year's exports amounted to 11 percent of the company's revenues. The value of exports reached zł.3.3 million in 2006 and the main foreign markets were Russia, the Czech Republic, Ukraine, Lithuania and Denmark.
"We are going to expand on both Eastern and Western markets. By 2009-2010, the share of exports in our sales will reach 30 percent," posits Sielski.
Numerical advantages
If all goes well with its export plans, the company's financial results should further rise. In Q1 2007, Radpol's net profit grew by 154.4 percent compared to Q1 2006, reaching zł.1.76 million. At the same time the company posted revenues of zł.7.81 million, a figure 47.2-percent higher than in the corresponding period of 2006.
"Radpol's dynamically growing net profit and revenues in the first quarter of 2007 stem from the company's strong position on the market. Thus we can predict good results in the next three quarters," says Sielski.
The firm's 2006 results amounted to zł.29.26 million in revenues and a net profit of zł.4.32 million. According to the prognoses at the end of this year Radpol expects to post revenues of zł.34.5 and net profit of zł.5.8 million.
Over the last four years, the company has grown by an average of 12 percent annually and analysts expect Radpol will triple net profit by the end of 2009. The firm's president expects 2009 to be a very important year for his firm.
"We will complete the work connected with the expansion of the company. We will no longer be burdened by the extension and modernization processes. It will be a break-through year because we will finally be able to fully use our production power," says Sielski.
