The right mix
On the day it debuted on the stock exchange, shares in Helio, a poppy-seed mix producer and nuts and raisins distributor, rose by 27.62 percent, and reached zł.13.40 compared to the issue price of zł.10.50.
"We expected growth because that's what usually happens when a company debuts on the market. Our company wasn't different in that respect. The value of shares was well-calculated. This has made us think that our strategy is good and appreciated by investors," says Leszek Wàsowicz, president of Helio.
Tomasz Binkiewicz, an analyst from DM BOŚ, says that Helio is interested in organic growth. "Most of the funds raised from the IPO are designated for the modernization and extension of the existing production facilities," he says.
Plot problems
Helio raised zł.11.8 million from the bourse. It plans to spend over zł.6 million on a new factory. "We are planning to expand our plant as we have too little space where we are now. Currently, we are looking for a plot. So far we've been searching around Warsaw, but apparently the price of plots in Poland skyrocketed after the Euro 2012 championships were announced. A few locations that we had taken into account were immediately sold," says Wąsowicz.
The new factory will be completed in two stages within the next three to four years. First, the company wants to build an assembly line for the production of poppy-seed cake mix, as well as some warehouses. The total space of this stage of the development should amount to some 6,000-7,000 sqm. The second stage will include a distribution center and more warehouses. The space will then expand to some 12,000-13,000 sqm. Currently, Helio produces 1.8 million kg of poppy-seed mix. The new venue will allow production to triple.
Humble beginnings
The company was set up by Wąsowicz and a friend in a third-floor apartment in the fall of 1992. "In the meantime we moved to a bigger venue, but in the course of time it turned out to be too small. Now, having learned from experience, we want the possibility for the further extension of the facility," says Wąsowicz.
Helio currently employs over 50 workers, but according to the president, employee turnover is very high. "Last year, wages in the sector grew by some 20-30 percent and yet it is hard for us to find stable employees," adds Wàsowicz.
The new production line will not consume all the funds raised from the bourse. The remaining zł.4 million will increase turnover capital, which, according to the president, is necessary along with the growing sales.
The company does not exclude future acquisitions. "We are looking around [and] if we find a medium-sized company with perspectives of growth we will try to buy it," says Wàsowicz.
Room for consolidation
Patrycja Ciosek, an analyst from PMR Publications, says the nuts-and-raisins market is very fragmented. "There are a few bigger companies like Bakalland or Helio, but the majority are small firms. The larger players are already announcing acquisitions," Ciosek says.
Bakalland, Helio's largest competitor, has recently announced several takeover bids and aims to expand internationally. Some even say Helio would be a takeover target for Bakalland.
"I am not considering such an option," says Wàsowicz. "We entered the Warsaw Stock Exchange to develop. If we wanted to sell the company we would have already sold it. The growth of our company, which is higher than our competitors', shows that [selling the firm] wouldn't be beneficial for the company now," adds the president.
Wàsowicz currently holds a 77-percent stake in the company but does not exclude reducing it in the future.
DM BOŚ's Binkiewcz believes that Helio's IPO was an announcement to the market that it is not interested in being acquired by another company.
Growing market
Wąsowicz says that the nuts and raisins market is worth some zł.550 million.
Helio's market share in nuts and raisins amounts to some seven percent, but the company produces over 60 percent of Poland's poppy-seed mix.
"Not so long ago I thought the market would grow by some six percent per year. Now I am sure the annual growth will amount to even 10-15 percent. This results from the increasing wealth of society. Consumers are able to buy more products which aren't regarded as essentials," the president says. Sobiesław Kozłowski, an analyst from BM BPH, shares Wąsowicz's opinion. "Poles' spending power is growing faster than ever, so consumers will buy more nuts and raisins," he says.
Helio wants to make its products more attractive by adding new mixtures or even offering completely new products such as cranberries. The company recently introduced a new brand - Słoneczne owoce (Sunny fruit), aiming at price-conscious customers.
"Poppy-seed mix is a very seasonal product. Sales grow dynamically just before Christmas and Easter. During the year they are very low. However, the seasonality is abating year by year, thanks in part to the healthy lifestyle which is becoming more and more fashionable," says Wąsowicz.
Domestic bliss
At present the company sells 100 percent of its products on the domestic market, but this may soon change. "We are negotiating, but so far we have not moved beyond talks. We are interested in entering the neighboring EU markets of the Czech Republic, Slovakia and perhaps Hungary," says Wąsowicz.
In the meantime, Wąsowicz is happy with the financial results the company has obtained on the domestic market.
"Sales in Q1 2007 are much higher than Q1 2006. This happened because the number of our partners is increasing. We have extended our presence in a supermarket chain and obtained a few major wholesale clients. Since the company was established, we have had at least a 25-percent sales growth per annum. I believe we have a chance to double our revenues within the next two years," says Wąsowicz.
