ES lights up the WSE
At its debut on the WSE last Friday, shares of ES-System, the largest Polish producer and distributor of lighting equipment, were worth zł.7.08 - 22.24 percent higher than the issue price of zł.5.80. The IPO comprised 6.5 million shares, earning zł.35.4 million - matching the figure estimated in the issue prospectus.
Bright ideas
The issue is aimed at providing the company with the capital necessary to fully implement its strategy. "First we want to invest in the modernization of our machine park and the technologies used. We will spend zł.30.4 million and we already have new designs. This will enable us to increase efficiency and launch new products," says Bogusław Pilszczek, president of ES-System.
The remaining zł.5 million will be designated for the construction of a new warehouse and production hall in Wilkasy. "The new investments will further strengthen ES-System's position. We want to continuously create demand on the market and then increase our production capacity," adds Pilszczek.
The company belongs to a group of Polish companies operating in professional interior lighting, mainly in public-utility buildings, and the exterior illumination of architectural monuments.
European leader
Narcyza Barczak-Araszkiewicz, general director at the Polish Association of Lighting Device Producers 'Pol-Lighting,' says Poland is the largest producer of lightbulbs in Europe. "The world's main producers have their companies in Poland. We are considered very good in terms of production technology and distribution," she notes.
The estimated value of the segment amounted to zł.867.3 million in 2005. ES-System leads the industry with a 15-percent market share, compared to the six-percent-or-less market shares held by its competitors. The zł.1.3 billion lighting-fixture segment, accounting for some 60 percent of the lighting market, is more fragmented, with over 1,000 small firms.
Growth potential
"The market has been growing for many years now. Lighting systems are constantly improving. Companies are using newer technologies. I believe the market will grow by some 20 percent each year," says Barczak-Araszkiewicz.
Pilszczek believes development will speed up as a result of new energy-saving solutions and acceleration in the construction industry, in addition to an influx of EU structural funds.
"If growth remains at the current pace, the world's energy consumption will increase by 300 percent. The average consumption of buildings lit in a traditional way amounts to 200 kWh per sqm per year. The EU's directive says it should be lowered to 80 kWh per sqm per year. Energy-saving solutions have been developed by ES-System for years. In some of the office buildings we light, the consumption is only 10 kWh per sqm, or less," says Pilszczek.
Green lights
These ecological solutions are among the biggest factors generating ES-System's growth. However, it all depends on the promotion and use of energy-saving devices. "There is a lot of room for improvement. The technology is already present in Poland but it still needs further popularization," adds Barczak-Araszkiewicz.
ES-System's products and services could become more attractive to foreign markets before they become popular at home. In 2004, the company's exports had already reached zł.760 million, 75 percent of which went to the EU. That year, ES-System patented its lighting solutions and has since won many prestigious contracts around the world, including the National Opera House in Oslo, Terminal 3 at Singapore's Changi Airport and the Foreign and Commonwealth Office in London.
"These contracts show that the brand is recognizable abroad. Having reached out this far, now their exports can grow further," says Michał Marczak, an analyst at DI BRE Bank.
Light of the world
Pilszczek says the company's aim is to increase exports. "Currently, we sell some 16 percent of our production abroad, mostly to the EU but we now send our products to Mexico and we have acquired the certification for export to the US," he says.
According to Marczak, increased exports will help the company become less dependent on the domestic market. "The company made profits even in times when the construction industry wasn't booming like it is now. Diversification of customers will help ES-System in case the industry collapses," says Marczak.
Such a collapse is unlikely, however. Pilszczek recalls the Central Statistical Office's figures, which suggest the industry will grow by some 15 percent this year. "I believe that is a modest estimate and I am not afraid our revenues will decrease. I am sure the fact that the company is now listed will contribute to growth," he adds.
Shine on
ES-System's financial results are impressive. Over the past four years, revenues have grown from zł.93.9 million to zł.142 million and net profits have risen from zł.8 million from a mere zł.474,000. "This year, we estimate that our results will respectively amount to zł.175 million in revenues and some zł.13 million in net profit. The prognosis is very realistic," says Pilszczek.
The company has subsidiaries in Germany and Scandinavia and co-owns a company in Kazakhstan, along with a wide net of distributors in the EU countries.
