Q&A on Aquila Part Prod listing

Jean Dumitrescu, Director of Investor Relations, responded to ZF's invitation to give an interview, in which he talks about the company's intentions for the future. You can read the full article below:

1. What exactly is the destination of the money from IPO? In which countries would you like to expand and why?

Aquila is the leader in the distribution market, but this is not a reason to stop us from developing our business. On the contrary, we are constantly innovating in order to maintain a consistent growth rate and thus keep pace with the development of an emerging market such as the one in Romania.

We believe that now is the time for new challenges, which we are prepared for and confident we will turn into benefits, both for the customers and suppliers we work with and for our employees and investors.

Listing Aquila is the next chapter of our development. 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 want to take advantage of the opportunities offered by the market intelligently, that is why the revenues obtained from the offer of shares will be used for growth and consolidation. Thus, we want to use between 50% -70% of the funds for the acquisition of companies that own important brands on the market of consumer goods and of some distribution companies with product portfolios complementary to the range offered by Aquila.

Then, 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 potential opportunities.

2. Do you have a clear target for the acquisition with the money raised or are you just in the market prospecting stage?

Aquila has extensive experience in developing its business based on the acquisition of players in the field of distribution, logistics and transport. The successful completion of the offer will allow us to purchase suitable companies that will allow us to increase the range of products offered and, equally, the most efficient use of the distribution network already built based on other acquisitions.

Agrirom and Trigor are the latest acquisitions, which have consolidated our leading position on the distribution market in Romania and the Republic of Moldova. Thus, we are interested to purchase national brands and distributors of consumer goods with significant market share in complementary categories in order to ensure synergies in terms of turnover and operating margin.

3. What part of the business has the greatest growth potential and why?

The distribution and logistics market in which we operate has a significant dynamic, and the products in our portfolio are essential for our customers' consumers. The pandemic showed us that certain categories of products and market segments have undergone changes, but the distribution provided by us in about 67,000 sale points helped us understand, react and even anticipate the steps that led us to a permanent increase of our financial indicators, along with the improvement of the quality of our services.

The distribution of consumer goods, in which Aquila is the owner of the goods and sells them through a sales structure of about 800 people, represents the main segment of the Group's activity, with a share of over 92% of total turnover in 2020.

Transport represents 3% of turnover, and logistics about 5%. Aquila's turnover increased by 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 our own brands. 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. Thus, we rely on increasing the market share in the field of frozen vegetables, by developing our own brand Gradena and Yachtis frozen fish products. These elements, together with the acquisition of companies, are the main growth pillars.

4. What measures do you intend to take to reduce CO2 emissions? What are your plans for this?

We support the transition to the lowest possible carbon footprint. That's why we work closely with our colleagues, partners and suppliers to find the best environmentally friendly solutions, both in current and future operations.

We have made several commitments in terms of social and environmental responsibility, such as reducing the carbon footprint by up to 10% in 5 years by optimizing delivery routes, implementing new logistics systems to optimize the use of landfills and the application of systems for the efficiency of the electricity consumption of the warehouses.

We also aim to equip the sales force with vehicles equipped with state-of-the-art, low-polluting and electric motors.

We are also considering actions to equip the entire Aquila fleet with Euro 6 engines in order to reach a car fleet composed of 100% Euro 6 vehicles, by 2024. In addition, the Group acquired in 2021 14 cars with alternative fuel (LPG) and for 2022 we are analyzing the start of a project on the domestic transport area with a tractor head powered by natural gas.

5. How much does poor infrastructure affect you and what do you expect from the political factor to continue development?

As an important player on the distribution market, we consider that any extra kilometer of infrastructure, built locally or centrally, is a gain for Romania and can contribute to improving delivery times and efficiency.

6. What is the growth rate of turnover in the next 3-5 years? (or how much you expect the logistics market to grow in the next 3-5 years)

Distribution and logistics activities are correlated with the growth of the economy and consumption in Romania. Aquila is one of the main distributors of consumer products in Romania and the Republic of Moldova, with over 26 years of experience in this field, with a distribution network covering about 67,000 points of sale. In addition, we offer complementary logistics and transport services on all temperature segments: ambient, refrigerated and frozen.

The distribution market has clear prospects for sustained growth in the coming years, as sectors such as HORECA recover from measures to prevent the spread of the pandemic. According to Euromonitor, it is estimated that this industry will have an annual growth rate of 14% over the next 5 years.

In 2020, Aquila had a turnover in the distribution segment of EUR 342 million, being the market leader and recorded an increase in turnover of 4% in 2020 compared to 2019. In the first half of this year it recorded a 15% increase over the same period last year. All these developments place us in a favorable position to benefit from changes in the market by focusing on high value-added products, expanding the product range and covering all distribution channels.

The planned acquisitions are aimed at increasing EBIDTA and significantly improving the financial position of Aquila Group.

7. What are your estimates for 2021 and 2022? Turnover, net profit?

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 the financial results for 2021 and 2022 due to our market position, growth plans and proven experience.

8. Most customers are part of the traditional trade. How do you see the evolution of traditional trade in Romania given the expansion of large retailers?

Aquila basically covers the entire distribution market, which allows us to be present on all channels: organized retail, traditional retail and HORECA. As a result of a long-term strategy, we are prepared and can even anticipate changing trends in this area. For example, we see a shift in consumer focus to convenience stores. But at the same time, big retailers continue to grow, and we keep up with this evolution.

9. How can Aquila develop in the future if the traditional trade segment decreases its share in total trade?

We are present on all channels and we can thus take advantage of any market evolution. The Group's turnover increased with a cumulative annual growth rate (CAGR) of 11.6% in the period 2018-2020, given that the share of traditional trade decreased in total trade. The Organized Retail Channel includes over 4,500 customers, the main customers being the chains of hypermarkets, supermarkets, discount stores, as well as over 1,400 gas stations. The total turnover of the Group on this channel in Romania in 2020 was RON 743 million, and on June 30, 2021 it reached RON 363 million. By developing the online B2B platform, we can say that Aquila continues to offer concrete solutions to our partners, both in the classic and in the digital version.

10. What impact does the increase of the Brent quotation have on the business? Will you transfer this increase to customers or will you get discounts from suppliers to compensate?

Brent quotes influence the whole economy. We have developed over time adjustment mechanisms that take into account the price of fuel and minimize the impact on the business.

At the same time, it is not the first time we see fluctuations and volatility in the market. Over the years, however, we have developed our ability to adapt and have a proven track record of identifying solutions that allow us to reduce such shocks.

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