Fisher king

Following regulators' approval of its issue prospectus on Ash Wednesday, Chojnice-based fish-processing company Seko plans to debut on the Warsaw floor in mid-March - the middle of Lent - when Poles traditionally eat more fish. Kazimierz Kustra, president of Seko, is taking the timing as a good sign, and hopes it will help the company implement its plans.

Those plans are extensive, since Seko will offer 2.15 million shares in total, each costing between zł.13 and zł.15.50. Thus the company could acquire between zł.27-33 million from the floor. Seko hopes to use this capital to create a large fish-processing group.

"Our target is to create the leading group on the Polish fish-processing market and acquire a strong position on foreign markets," says Kustra.

Casting the net

Seko's strategy is divided into two stages. First, the company wants to take over a company that buys and initially processes fish from the Baltic Sea, as well as acquire a fish-product wholesaler.

"We have already signed a letter of intent with the first company. We also want to buy a few wholesalers, because it is the wholesaler who decides which products will be sold to shops. In total we want to spend some zł.12 million on acquisitions," says Kustra.

Bogusław Taźbirek, an analyst from DM Polonia Net, says that for the last couple of years the number of fish processors has dropped from some 500 companies to 200. "There were two reasons for this: consolidation on the market and efficiency. Only those that are profitable remain," says Taźbirek. He believes that the consolidation process will continue.

In June, Seko will launch construction on a new factory that will increase the company's production capacity by 50 percent. Currently, the company owns a network of small fish shops in Tri-city. Seko is now looking to other regions of Poland to open similar networks.

Stronger swimmer

In the second stage of its strategy, between 2008 and 2010, the firm wants to expand its offer and strengthen its distribution channels. According to Kustra, the company produces around 80 different products and introduces three or four new products each quarter. In the future, it wants to increase the diversity of its range of products because in the summer, sales tend to fall.

Seko is also looking to acquire a canned-fish producer and increase exports. Taźbirek says that the acquisition of such a company would lower the seasonality of production and enable the company to maintain employment levels.

Across the sea

"Export is an engine of development," says Kustra. "If we are able to compete on the EU market, it means that from the technological point of view, we are better than Western companies. No country in the EU has such a rich range of products as Poland does. In three to four years' time, we want to increase exports to 20-25 percent of production in order to be less dependent on distributors who demand lower prices."

Jerzy Safader, president of the Polish Association of Fish Processors (PSPR), confirms the Polish fish-processing market is one of the most modern in Europe. "This helps sell our products abroad," he says.

Now Seko exports some eight percent of its production. Over 70 percent of all exported products go to France. Other destinations include Germany, Slovakia, Hungary, Italy, Ireland and the Czech Republic. The company's goods are also sold in the United States through independent distributors.

According to Joanna Szymczak, director of export and import at Seko, the US is not included in its export figures. "We want to change that. Apart from that, the company will soon sign contracts in Germany and Ukraine. That should make the exports rise," she says.

Angling for investments

After the IPO, the company is not planning to pay out dividends. "We want to designate profits for new investments. So far, we have spent some zł.5 million on investments every year," says Kustra.

Taźbirek believes that, thanks to organic growth, the company has managed to achieve good results within a relatively short period of time. The company was set up in 1992 with an initial capital of zł.4,000 and employed 20 people. Now the company has a large modern factory and employs almost 500 workers. Currently, Seko is Poland's second-largest producer of pickled fish and fish salads after Lisner, with a market share of some 18-20 percent.

Seko's 2005 revenues amounted to zł.72.4 million and its net profit reached zł.2.6 million. The company estimates that last year, revenues grew to zł.79.7 million and that net profits reached zł.2.7 million.

"In 2007 we plan to reach revenues of some zł.95 million without any acquisitions. We already have double-digit growth in January compared to [January] last year," says Kustra.

Healthy appetite

According to Seko's president, all surveys indicate that the consumption of fish in Poland will grow. "First, fish is healthy and a growing number of Poles are looking for a healthier way of life. Second, society is becoming wealthier," he says.

Currently, Poles consume only about six kg of fish per year, compared to the average 24 kg in the European Union. The Spanish eat over 40 kg of fish per year.

PSPR's Safader is less optimistic than Kustra. "Indeed, there is great potential in the Polish market. The problem is that our society is poorer and if we have a family of four living on an average salary, they will not buy fish for over zł.20 a kilo if they can get poultry for zł.4 per kilo. The consumption of fish will not grow unless purchasing power increases," says Safader.

Seko

CEO:   Kazimierz Kustra

Strengths:

- Leading position on the market

- The largest assortment of fish products

Weaknesses:

- Growth of raw fish prices

- Instability of the euro