Horaţiu Ţepeş, the 36-year-old entrepreneur from Braşov, rules the local roofing market through his company, Bilka. He has had a decisive influence upon the roofing market in Romania. He started this journey ten years ago, having nothing but ambition, zest for work and a clear picture of what he was to accomplish.

Since 2009, when the company’s turnover amounted to EUR 5 million, we have received many different acquisition proposals, but I do not see any benefits in this. Investment funds are a component of the company’s financing. And we do not need financing. There is nothing for sale. To any strategic investor. We know our next steps for the future 20 years. The company has great potential for the next ten years and selling any stake brings no benefits for me or for the team”, says calmly but firmly Horațiu Țepeș, the owner and founder of Bilka. 2009 was the third year of business for Bilka. “This could be a family business. This would be the recipe”, he says. At 36 years old, he has yet to think of the generation to take over the business. However, he would like to develop a family business, but he will not force his children into it.

Beyond optimistic expectations

The yearend income estimated by Bilka amounts to RON 400 million, i.e. 48% higher than last year and way above the estimates at the beginning of the year. This is due to the accelerated expansion of the residential construction market, as well as to the economic growth – by 72.4% in the first six months, according to the National Statistics Institute. Bilka’s turnover last year amounted to RON 271 million, and estimates for this year go up to RON 360 million. If this pace is preserved, the business could exceed the threshold of EUR 100 million next year, after ten years from the production start.

Bilka registered a 54% growth in the first six months of this year, versus the same period of the last year, reaching RON 147 million (EUR 32.5 million in H1). During the first semester, the company achieved 33%-35% of the year’s turnover, the period including the winter season. “The half-year results are in line with those of the past years. We made a bold plan for the year, but the economy does fine and we can feel this through our distribution network. Optimism is in the air, not only in Romania but also in the neighboring countries, even if they do not have the 6% economic growth. Exports are on the increase.”

Bilka abroad

Exports represented 33% of the H1 turnover. The company from Romania covers houses in Hungary, Bulgaria, the Republic of Moldova, Ukraine, and Poland, but it also receives spot orders from France and Germany. “We do target certain countries, but in view of the average 30-40% turnover growth at the local level, we have focused a lot on the domestic market. We have to consolidate our position here and widen our product range. We have improved our services a lot. We have assumed the market leader role seriously and come up with innovative things. Our whole focus on the domestic business has left little room for exports”, says Țepeș, who chose the company’s name in 2007, from a map of South-Eastern Europe. Bilka is a village in Bulgaria. The name has Scandinavian connotations as well, Bilka being also the name of a store chain in Denmark. “I liked the name and I felt it fit my plans. I chose a name that has the sound of metal tiles, that is short,” says Țepeș.

Exports require a strong country brand, says the founder of Bilka, whose experience abroad has shown him that the Romanian business environment has developed a lot in the past five years: “It is much more correct than in many other EU countries. Black economy and tax evasion have decreased a lot. Things are moving in the right direction.”

Challenges

The founder of Bilka is aware that the dynamics of his business, translated into 2-digit annual growth rates, i.e. 40-45%, is also due to the immature Romanian market. Particularly because the situation brings challenges different from those of a company facing difficulties. “Our production capacity is just fine. We have developed it every year, but this capacity is not only about the number of hourly manufactured square meters. It is also about the stock of raw materials, the team, and logistics, as delivery times are also important, considering that this is mainly an order-based business” points out Țepeș. The delivery of an order for a Bilka roof can take between one and three days, from the measurements to the client’s yard, depending on the size and distance. For installation, the company works with a network of partners. The network comprises 500 distribution points – construction material warehouses, qualified roof workers, export and DIY stores. The Bilka factory is used at a capacity of 30%-80%, with monthly variations, depending on the season. The season for roof installation works can last until December 15.

Additionally, the business growth has been supported by EUR 10-million investments made between 2014 and 2016, in order to expand the production capacity for the residential sector. Investments were made on the Romlag platform, which is close to the first Bilka factory and the company’s headquarters in Brașov.

Next level

With the production for the residential sector perfectly tuned, Țepeș is ready for the next level he has been talking about for a couple of years: the production for the industrial sector, i.e. turnkey halls for industrial areas and logistic parks – sandwich panels, high and low profile corrugated metal sheets, structures. The investment for this project amounts to EUR 20 million, including the land he is about to purchase. They need between 8 and 12 hectares, and they already have a few options in Brașov. “The best option for our industrial project is the Rulmentul platform, which is close to our factory, but that is a public domain land and authorities do nothing about it. It is just left in ruins. We have grown tired of talking about it. There was a discussion in 2010, but on account of the huge debt of the factory, the platform was taken over by AVAS (renamed the Authority for the Management of State Assets in 2012). So, instead of belonging to the state’s private sector, it was transferred to the public domain, where nothing really happens. Splitting production in two locations is an impediment, but we shall organize things properly”, says Țepeș. Bilka has brought the issue of the Rulmentul platform before the authorities, both the central (The Ministry of Economy, different competent ministers) and the local ones.

The investment for the industrial sector will be implemented in three years and may be completed in 2020. Discussions for the implementation of this project have already started, with recruitments for production and sales. Likewise, for the manufacturing of sandwich panels, a consultancy firm from Italy has been commissioned, as manufacturing methods for this kind of product differ from those that the company has used so far – it is not only a matter of cold forming, but it also involves the use of chemical components (polyurethane) and other elements. They sought consultancy from an Italian company also when they started to manufacture the rainwater system, which is a LEGO-like system that can be assembled by the owner.

For the further development towards the industrial sector, the founder of Bilka has researched the construction market in order to take over other players: “We have always made calculations so as to see what is more effective: to build or to buy? We have reached the conclusion that it’s best to build the industrial division ourselves.”

Financing

The resources for the new investment shall be allocated from the company’s profit in the next years, European funds and loans. Last year’s net profit was EUR 7 million (RON 30 million). “More important is the fact that 2016 was the first year in which the net profit exceeded the investment. With the profit of 2016 and 2017, we consolidate the working capital and then invest in the industrial sector”, points out Țepeș. In 2015, Bilka had a net profit of approximately EUR 3 million, and the investments of 2014 and 2015 were higher than the profit.

“European funds represented a small part of everything we have invested in the past years, but using this component is also important. We are actually really pleased with the 2007-2013 European funds. We had five files and accessed over EUR 2 million which we invested in equipment. In case of the first de minimis aid, for a corrugated metal sheet product, in 2009, when we did not believe in funds and immediate disbursement of the money, the amount of EUR 100,000 was rather helpful for a company with a EUR 5 million turnover. We took into account possible delays”, explains Țepeș. For instance, from the ten-million investment in the residential division, one million came from European funds, plus an additional state aid of one million RON (EUR 225,000) for tax exemption due to the creation of over 30 workplaces. The manufacturer intends to access European funds from the 2014-2020 budget as well, but considering that no program has been launched yet, he is less optimistic.

On the other hand, Țepeș is pleased with the cooperation with the banks: “A lot depends on the financial education of the companies. On the way, they consider the banks’ conditions and cost calculations, but we have not felt any reluctance on their part. After all, banking activity depends on the business environment. Credit-worthy companies with a good business plan, as the history with the bank in our case, is not significant, have no difficulties in relation to banks.”

Moreover, as part of the measures taken by the authorities, Bilka obtained a tax exemption for reinvested profits in 2015 and 2016. “These measures should be maintained for a long period of time. If they change, either for better or for worse, making predictions will be difficult for a company”, Țepeș added. Every 50 additional kilometers on the Western Motorway helped them deliver the products faster and reduce transportation and maintenance costs: “The lack of infrastructure is an obstacle to our development, but we hope things will improve. It would mean a lot. Not only for us but for the whole economy, as well.”

Stability and Forecast, Again

The development of the new lines is not a problem in terms of the workforce either, because the salary package is above the average, being correlated with the average national wage and the average wage in Brașov county. “There have been changes, however, starting with 2015. In 2015, any recruitment campaign for certain production departments resulted in 300 received résumés weekly, and we now receive only 20. We do offer certain advantages because we are based in the city, the wage is above the average, we offer additional benefits and training courses to our employees”, detailed Țepeș.

On the other hand, staff qualification is indeed an issue. “This is the result of the past 25 years in terms of education in Romania. Our staff turnover is minimal so that we do not have a problem with the training of the new employees”, declared the founder of Bilka. Ten out of the initial 15 employees in 2008 are still working for the company. Most of the employees are trained on the job. An operator can learn everything in two weeks, as the equipment is provided with touchscreens and the product range is not very wide.

At present, Bilka counts 340 employees, which is 26% more than at the end of the last year. “Considering the increase in our turnover and the further development of the company, the number of employees will definitely go up, but, at the same time, we have also streamlined our activity. We give a thorough analysis of the possibility of using robots in certain production areas. We do have several robot-operated sectors, and the equipment is efficient. A metal tile production line requires just one person for a 150-sqm daily capacity”, added Țepeș. The factory also produces corrugated tile and roof accessories, on a daily basis.

“Education will have to be facilitated in order to attract a new workforce, particularly in the areas where Romanians represent the minority population – Cernăuți, Serbia. Attracting 400,000-500,000 Romanian speaking people in the next period would solve many problems. Another important aspect is the creation of a program for the Romanians abroad who are not very well established there”, believes Țepeș. He thinks of a premium to bring back the Romanians working abroad legally, whereas the money for such premium could be indirectly recovered from the income taxes paid for them: “If 100,000-200,000 Romanians, plus other 300,000 from the neighboring countries were attracted, the economy would certainly have a lot to gain.” As a matter of fact, Țepeș has come to the conclusion that adaptability, ambition, and work power are very important when doing business: “Things change a lot in the business environment, especially in Central and Eastern Europe.” Particularly in the forthcoming 20 years.

Article published in the “Imperiul Francizelor” magazine, Forbes September 2017.