Jean Dumitrescu, Director of Investor Relations, was interviewed by the Bursa newspaper about the Aquila listing on the stock exchange
Our colleague, Jean Dumitrescu, Director of Investor Relations, was interviewed by the Bursa newspaper about the Aquila listing on the stock exchange. Please find below the article:
Reporter: What was your reasoning for listing on the stock exchange and what are your expectations after this listing?
Jean Dumitrescu: As a leader in the distribution market, Aquila is now developing its strategy for the next chapter of its development, in order to be able to take full advantage of the opportunities offered by the market and the new consumption trends. We decided to accelerate this evolution and to list at BVB in order to maintain a consistent growth rate and to enter or strengthen our position on segments with high added value. Our mission is to be our customers' first choice, and the long-term vision is to have at least one product distributed by us in every home.
We sell consumer goods in over 67,000 sale points, i.e. we provide Romanians with products from basic categories such as cleaning and home care products, personal care, detergents and bases for cooked food, chocolate and other sweets, coffee or pet food from world-famous brands such as Dero, Cif, Rexona, Kinder, Rafaello, Mars, Snickers, Lavazza or Zewa and others. Following the listing, we will implement our expansion plans, both by expanding our product portfolio and by acquiring companies that aim to increase market share (including our own brands Gradena and Yachtis), sales and scale economies. Coupled with automation and digitization, these directions of development are likely to increase profit margins and, consequently, generate value for shareholders.
Reporter: According to the information presented in the Prospectus, most of the money you want to raise from the market will be used to acquire companies. Can you give us more details about the reasons behind this development strategy? Do you also consider companies from other countries?
Jean Dumitrescu: The distribution market is fragmented and needs consolidation, and Aquila is in a very good position as a market leader and experienced in procurement. We are used to growing through acquisitions and we believe that we will be able to offer our investors attractive returns by continuing this strategy. The most recent examples are Agrirom and Trigor companies, which have consolidated our leading position on the distribution market in Romania and the Republic of Moldova.
We have a distribution network in 67,000 sale points, a storage infrastructure of 120,000 sqm and a sales force of about 800 people. We want to use these resources to accelerate sales growth and increase profitability by acquiring national brands of consumer goods and other distributors of consumer goods with significant market share in complementary categories, with synergies in turnover and operating margin.
Reporter: According to several market opinions, the price range in the offer makes Aquila Part Prod Com a relatively expensive stock / company (the Price to Earnings Ratio ratio is between 17.5 and 20.7, higher than the PER ratio of most companies included in the BET index). What is your feedback on these opinions?
Jean Dumitrescu: We carry out a capital increase, which means that the attracted funds remain in the company and show our commitment to invest in growing the business, and the PER interval mentioned in the question does not take into account the effect of capital increase in profitability which will be seen in the future. The PER calculated by reference to the number of previously existing IPO shares is between 12.2 and 14.4 (range determined by the price range), given that there are now liquid shares on BVB that have a PER of over 30.
We consider that, in addition to PER, there are other things that are worth being taken into account, such as the leading position on the consumer distribution market, the high return on invested capital, the distribution network of 67,000 sale points, the categories of products sold. and distributed brands. Also, although Aquila is in a growth stage (including by investing the amounts attracted from the IPO), we intend to recommend to shareholders a regular distribution of profit in the form of dividends in a proportion of approximately 40% of distributable profits.
We are confident, given that 2020, specifically, brought a 10.8% increase in the consumer goods market compared to 2019, under the strong influence of consumer behaviors, changed by the COVID-19 pandemic. The local market performed well, even if we compare it with the rest of the Central and Eastern European region, registering the third highest growth rate at regional level.
Reporter: How do you estimate that the period of high inflation we are going through which is expected to last longer than initially planned will impact Aquila's activity?
Jean Dumitrescu: Inflation is a phenomenon that influences the whole economy. We distribute basic products for Romanians, top brands in categories that have proven to be more than resilient in times of inflation or crisis. We have also developed over time adjustment mechanisms that take into account input prices such as fuel and minimize the impact on the business. We have a proven track record of identifying solutions that allow us to cushion such effects. In addition, due to our bargaining power and the long-term relationships we have with our partners, we can negotiate better prices, which are ultimately reflected in shelf prices.
Reporter: What strategy do you have in order to overcome this period of health crisis?
Jean Dumitrescu: With an average number of over 2,800 employees in Aquila, we focus on their health and well-being. We have implemented mandatory incident management procedures and regular training in the field of occupational safety and security.
Since the start of the pandemic, we have implemented a shift work schedule for some of Aquila's employees. We trained employees on compliance with health prevention measures and social distancing, in conjunction with the implementation of a staggered program for warehouse staff, entered into agreements with other companies to provide backup for product distribution and adjusted operations to adapt to developments unpredictable market conditions.
In addition, we focus on automation and digitization, which help reduce health risks, and improve costs and traceability.
Reporter: What investment projects do you have underway?
Jean Dumitrescu: We constantly invest in the automation and digitization of our operations, in our warehouses and in the car fleet. For example, we are in the process of implementing a system that allows combining several orders (multi order pickers) by a single operator, plus the replacement of the conventional system of picking (preparation of goods) by RF terminal (radio frequencies) with the voice and vision picking. We are also preparing investments in green energy, such as photovoltaic panels on energy-intensive warehouses.
Reporter: What other projects are you going to carry out?
Jean Dumitrescu: We want to use between 50% and 70% of the funds attracted from the IPO for the acquisition of companies that have important brands on the consumer goods market and of some distribution companies with product portfolios complementary to the range offered by Aquila. Moreover, we plan to use 10% -15% of funds for working capital, between 10% -15%, for projects to digitize operations, improve customer service, increase traceability and productivity and a similar percentage for the development of own brands and some new ones. We aim to strengthen Aquila's position in Romania and the Republic of Moldova, without now having immediate plans to target other markets, but we are monitoring the political and economic context of the surrounding countries and possible opportunities.
Among the Group's expansion investments, we expect investments in warehouse equipment with Li-Ion technology, Pick by Light, Pick by Voice, Multi Order Picking automations, mobile shelves in frozen warehouses, VNA-very narrow aisle systems ), investments in IT systems (Enterprise Resource Planning, Transport Management System), online commerce platform for HORECA business customers and top customers on the Traditional Retail channel, which will allow order automation and easy access by customers to the status of orders, stocks, receivables and promotions dedicated to them.
Reporter: What turnover do you estimate for 2021?
Jean Dumitrescu: Aquila's turnover increased with a cumulative annual rate (CAGR) of 11.6% from 2018 to 2020, as a result of streamlining operations and product portfolio. We aim to increase profit margins by developing an extensive portfolio of own brands acquired and developed. The distribution network to which Aquila has access represents approximately 90% of the total universe of Organized Retail and Traditional Retail channels, so that it can easily capture the rapid growth of the market by developing its own brands. In the first half of this year, we recorded a 15% increase in turnover compared to the comparable period last year and an advance of 4% in profit. We are optimistic about a favorable evolution for this year.
Reporter: How do you think the profile market will evolve?
Jean Dumitrescu: In the last three years, the compound annual growth rate of sales on the consumer goods market was 8%, registering a level of 23.5 billion euros in 2020, increasing by 10% compared to 2019. Modern Retail within the Organized Retail channel registered a share of 68%, while the Traditional Retail channel represented 32% of the total consumer goods market in Romania in 2020. The annual growth rate for the consumer goods market is forecasted at 5% , until 2025. It is estimated that modern retail will register an average annual growth of 7%, while the traditional retail channel will remain at the same level.
Aquila has a strong position in certain categories of the consumer goods industry, which, according to Euromonitor, are expected to grow at an accelerated pace in the coming years - for example, the ready-meals market, which has a forecasted growth of 10% from 2021 to 2025.
Reporter: In what sense is the market you activate affected by the pandemic?
Jean Dumitrescu: As seen in almost two years, the consumer goods market has demonstrated exceptional resilience, under stress. Despite the uncertainty, the supply of consumers was not interrupted, and the business in the field was able to continue its activity. As leaders in the distribution market, we believe that the market will grow rapidly in the coming years, modeled on the rest of the more mature markets in Central and Western Europe, but we will closely monitor the effects of the pandemic.
Reporter: Thank you!