Hard-pressed for profit
Hard times
Hardex's results were affected by issues plaguing the whole industry - rising costs, growing competition and a strong domestic currency. According to Tomasz Bistulas, an analyst at brokerage Wrocławski, the outlook for the sector is not good.
"In general the branch has lots of problems - production costs are rising, the strength of the złoty is significantly decreasing profits and competition is strong. Moreover, the whole branch is facing a downturn," Bistulas told WBJ.
The strength of the złoty is particularly problematic for Hardex. Around 53 percent of the firm's production is exported, mainly to EU countries such as Denmark, Sweden, the Netherlands, Germany, Italy and Spain.
According to Anna Juszczyk, a member of Hardex's management board, the company will be able to cope with the strong currency. "Hardex imports lacquers and spare parts, mainly from Germany, so imports somehow compensate [for the currency]," she said.
"We are beating our competitors, [providing] the highest quality as we focus on the best, most modern machinery, best materials and large capacity," said Juszczyk. "Our [production] capacity is such that we are able to fulfill all our customers' orders," she told WBJ.
Despite poor market conditions, Wrocławski's Bistulas doesn't see the firm as endangered. "Hardex itself is stable and strong. It has around 40 percent of the domestic market and strong shareholders," he explained.
Established in 1970, Hardex was long the market leader in Poland. In 2005, however, German firm Steico acquired a hardboard plant inPoland, challenging the firm for the top spot. In order to fight for market share, Hardex sought fresh capital.
The company debuted on the Warsaw Stock Exchange on April 3, 2008, to help fulfill its long-term investment strategy and fund modernization work. The process of modernizing its plant is scheduled for completion in 2011.
After its debut, the firm's main shareholder became investment fund BBI Capital, which obtained a 49.93-percent stake. The second-largest shareholder is still the State Treasury, with a 22.89-percent stake.
Searching for new niches
Hardex produces hardboard using a traditional "wet method." Apart from Steico, it also faces competition from companies specializing in "dry method" hardboard. Hardex's annual production capacity amounts to about 28 million sqm of hardboard.
The company's products serve a number of industries, including furniture producers, door makers, packaging manufacturers and the motor industry. "Furniture is the key to our success, as the market is surging. It is estimated that growth will be at least 10 percent every year," said Juszczyk.
"However, we are always searching for new niches where our hardboard would be useful," she added. According to analysts this is a good strategy - the global furniture industry is facing a recession and this could soon have an impact on Hardex's results, shrinking the firm's net profit further.
Hardex CEO: Ireneusz Kaczmarek
Strengths:
- Leading producer of "wet-method" hardboard
- Boom on the construction market
Weaknesses:
- Global industry experiencing a downturn
- Long and costly modernization process
