Shares of a Hungarian company soar on the stock exchange – they are set to reach 200 million euro turnover

English2021. jún. 6.Növekedé

Masterplast first started as a garage start-up, became market leader at the turn of the millennium, and by now it has grown into the largest Hungarian-owned building material manufacturer in the Central European region. Last year, it got involved in the manufacturing of face masks and protective clothing with the well-timed acquisition of a German company, and its shares are now soaring on the stock market. Vice President Balázs Ács talked to Növekedé about the secret of their success and how they will reach two hundred million euros in sales revenue in two years.

Masterplast had an outstandingly successful year in 2020. What is behind this spectacular success?

On the one hand, the company, along with its subsidiaries in Hungary and in the surrounding countries, managed to develop spectacularly in an organic way, in the traditional construction industry segment.

In addition, we entered a completely new area by acquiring a German company that manufactures fleece, a raw material for protective equipment used in hospitals, among other things.

It was perfect timing. How did you manage to broker such a deal?

LHB in Aschersleben used to be one of our supplier partners. We had been working together for a long time, and the acquisition had already been in the pipeline before the pandemic. Eventually, the transaction became a little harder because of the pandemic, so currently we have fifty percent ownership and management rights, and the company will be completely ours in two years.

Does this mean that one half of the company manufactures construction materials and the other half produces raw materials for the healthcare industry?

We are not there yet, but we are trying to strengthen our medical fleece production capacity as much as possible and to gain a foothold in that market as well. This is a completely different industry, although the raw materials used for the production of face masks and roofing sheets, for example, are similar.

The healthcare industry in the west has been using disposable bed sheets and disposable medical protective clothing instead of the traditional, washable fabrics for a long time. This trend is also starting to prevail in Central Europe and will move further on to the East.

This process had started before the outbreak of the pandemic last year, and we see a great future in the production of such products.

What is the proportion of the company’s revenues generated in Hungary and in other countries?

Forty-five percent of our sales revenue is generated domestically, and fifty-five percent comes from foreign subsidiaries and from our export activities.

In the spring, the chemical plant of BASF in Ludwigshafen burned down affecting plaster and insulation manufacturers, the accident of Ever Given blocked trade, shipping costs rose globally, and some construction raw materials became more expensive. There is a shortage of raw materials all over the world, not to mention the euro/forint exchange rate. How can you cope with all this?

I would add to this list the heavy snowfall in Texas, which also caused serious problems for many European producers because certain raw materials are purchased from there; and also the special situation regarding Dunaferr, which is causing a disruption in the supply of steel products.

In the last five months the industries supplying construction raw materials have been going through an unprecedented turmoil. We’ve been involved in this industry for quite some time, but what we are seeing now is astonishing. The price of raw materials increased by thirty, forty, even fifty percent, which had to be passed on to the market, but the shortage was a much bigger problem.

Fortunately, we did not have to stop production because of that, we were only forced to shut down for a few days in Germany, but it was manageable. It is true, however, that we had to switch to more expensive raw materials in many cases, and just like every other player in the market, we were unable to quote our construction partners far in advance. It was only possible to get through this period with a very flexible approach accepting many modifications.

What about the performance of the construction industry in recent months and what can you expect if the coronavirus recedes?

According to Central Statistical Office data, the construction output in March 2021 was 4.3% higher than a year earlier, which represents an increase of 11.5% compared to the working day adjusted output in February.

In the construction industry we can’t expect a sharp upswing after the epidemic, as the general lockdown did not hit the sector significantly.

Stable growth is expected to continue, but the question is how unskilled and skilled labour shortages will affect this upward trend.

Masterplast also receives state subsidies, what do you use it for?

We improve production. At our centre in Sárszentmihály, we would like to start the medical fleece production for the health industry already this summer. The construction of the new hall is in the final phase, the installation of the machines has already started, while the necessary extension of our storage capacity is also underway.

For 2023, you are planning to reach a turnover of two hundred million euros. What is the basis for this ambitious plan?

In Hungary, the government has launched incentive programs to boost investment and the purchase of residential properties and these programs work as a spectacular driving force for the construction industry. The reduced five percent VAT rate on the construction of new homes was also extended, which encourages investors, and due to the available housing subsidies, the construction of detached houses has also taken off.

Renovation subsidies can also boost the demand for our products: many homeowners choose to install new facade insulation, for example, which not only enables them to modernize the building in terms of energy consumption, but also to give the building a new colour.

There are many different kinds of government support schemes available, and so I think the construction industry will remain on a growing trajectory in the long run, ensuring a rising trend for manufacturers as well.

In the field of healthcare products, we will not only produce the raw material; protective clothing, hair nets and foot protectors will also appear in our portfolio, which is expected to generate significant revenue. These will primarily meet domestic needs, but will also be marketable in any country in Western Europe.

Will the soaring share price and rising profits also mean that progress can be made regarding dividend at the company as well?

This has already happened. At the end of last month, we announced that we would pay 44 forints dividend. Last year, there was no dividend payment because of the acquisition in Germany, while two years ago it was 34 forints per share.

If your plans come true, do you think a turnover of 1 billion euros can be reached in ten years?

I wouldn’t dare to plan so much in advance, but of course our goal is to increase our sales revenue as dynamically as possible.

The billionaire owners of Videoton also bought a stake in your company. What does that mean for you, how much say do they have in the operation of the company?

We have known each other with Ottó Sinkó and Péter Lakatos for a long time, we often used to sit down for discussions; and now this good relationship has turned official with Ottó Sinkó becoming a member of the board.

They don’t get involved in the operational work of the management; they provide help with their experience as outside observers, which means a lot to us given that they have been working in the world of business for a long time.

Masterplast became market leader as early as in the late 1990s, and later it became the largest Hungarian-owned building material manufacturer in the Central European region. What was the reason behind your initial success?

In 1997, we started as a typical garage start-up with my business partner, and two years later we established our first subsidiary in Slovakia, and after that in other neighbouring countries. I think one of the reasons for our success was exactly this:

we made the reasonable and informed decision to expand abroad in the form of subsidiaries, which resulted in a sudden growth in the initial period.

Meanwhile, if a product was launched in Hungary and we saw a certain potential in it, we started manufacturing it ourselves. By now, we have come to the point where we have a product, fibreglass mesh - one of the elements of facade insulation systems -, in which we are the second largest manufacturer in Europe.

Another factor that also contributed to our initial success was that

from the very start we used our own logistics fleet to provide flexible service to our customers.

You put up a statue for Sándor Demján in your company premises. Did you know him personally?

No, we didn’t, and we are sorry that we never met him. In his time, he was considered by many people an example to be followed and we were no exception; we were following his career, his way of thinking and his business activities.

The statue was put up in Sárszentmihály, because Sándor Demján's career started here as head of the local Gorsium ÁFÉSZ. From here, he launched a number of businesses that are still in operation today. Many of his former colleagues attended the inauguration as well.

Your company is one of the biggest sponsors of Hungarian five-a-side football. Do you play yourselves as well?

My business partner, Dávid Tibor is the president of the National Mini-Football Association; we sometimes play in the old boys team within the company, sometimes even on a big pitch, but personally I'm already getting too old for that....