'You can't stop in a crisis'. Dariusz Piotrowski on investment in Melaco
The socio-economic situation in Poland and the world is constantly influencing the shape of the furniture industry. How does Melaco deal with this? By investing in development. We talk to Dariusz Piotrowski, Melaco’s Vice President, about the past months and plans for the coming months.
Let’s start with a summary of the last three quarters in the industry from Melaco’s perspective. There is a war going on all the time, there are echoes of the pandemic. How is the industry reacting to world events at the moment?
The war is still going on, the pandemics are gone, while today the market is still struggling with the effects of these events. What we see on a daily basis in the economic information that comes in and out of the country and the world does not quite present the full picture. The world is still struggling with inflation, high interest rates and recession. This is spoken about more or less directly, while today at Melaco our eyes are also on our neighbour Germany, which is our important trading partner. Today 70% of Polish furniture exports are sent to Germany.
How does Germany’s economic condition affect our economy and the way Polish companies operate?
These are strongly interconnected markets. The information we receive from the market, from customers and contractors, is simply dire. There is talk of company bankruptcies and plant closures. More and more frequently, information about further bankruptcies is appearing in the media, and I am not only referring to the automotive industry, which is the most talked about and which has a major impact on Polish companies and the spare parts industry. Everyone probably knows the Maja company, even if they are not from the furniture industry. In September, we received news that this powerful furniture factory in north-eastern Saxony, which produced 25,000 pieces of furniture a day, would be closing down. The crisis is not sparing our customers, and a company we worked with some time ago, a German manufacturer of furniture fronts and components, has also declared bankruptcy.
The German market is doing badly and we have to keep an eye on this situation, while, despite everything, the Polish industry is in a much better situation. Both we and our customers in Poland are doing well.
Is this the calm before the storm? Will this wave also reach us or are we a different market?
With us it looks a little different. As far as Germany is concerned, it was mainly large factories that closed down there, companies that were geared to large production volumes, not very flexible organisations. So when they ran out of volume, the factories were no longer profitable.
Polish companies are more flexible, they can adapt to the market more easily and quickly. In addition, all those orders which were still being carried out by German factories and which today are unprofitable for them, end up with us, with our Polish manufacturers. They supply our suppliers, which indirectly improves their situation.
On the other hand, it should be added that Polish industry is very healthy in terms of modernity and potential, and is doing really well. The horizons of Polish furniture manufacturers are much wider, ingenuity is huge, and this is very much needed in the furniture industry market today. When the number of orders is falling, there is a price battle and a lot of pressure to survive, openness to new ones is extremely important.
During the pandemic period, we talked about the difficulties in sourcing materials and with supplies. Has this normalised?
There is no shortage of materials today, factories are full to the roof. The problem arises when the material has to be produced because there is no continuity in production due to too few orders. If the lines cannot be filled, manufacturers introduce stoppages so as not to generate additional costs, as we saw even in the second half of August and in September.
Particleboard factories, which are heavily dependent on the German market, are currently experiencing major problems. They are forced to fight a price battle at the moment, in other words they are cutting prices, they are snatching these cubic metres of board out of their hands, and this is causing great confusion. And it has a knock-on effect on us, because if the manufacturer cuts the price of the boards by 20%, our customer also wants the cabinet to be 20% cheaper. On the other hand, it doesn’t work like that, because we produce a semi-finished or finished product in which the raw board material is 20-30% of the value.
Read also: Sustainability for the environment at Melaco
How do you operate on the market in such a situation? Where is Melaco at the moment?
The last nine months have been very good for us. The first half of the year especially, then the holiday period, which always brings a significant drop in orders, was a bit of a factor. Fewer orders, higher costs – this affects the situation and the results. Nonetheless, compared to last year’s period, we recorded a sales increase of more than 20 per cent, and the forecast for October was already looking good in September, especially as we had quite an ambitious production plan for that month. We are also managing by attracting new customers, implementing new projects, taking care of the customers we already have, and all this is translating into good sales results.
In the case of a production plant with a profile such as Melaco’s, is it better to look for new solutions or to wait out these more difficult moments on the market?
Waiting is the worst approach. If you wait, you can miss out, and the world is moving forward. Regardless of the fact that the economic situation is as it is. But one also uses this period to grow. This is a chance to catch the wind in our sails, so we will prepare for future investments today. We are in the process of concluding contracts with the service providers we need at this time. Starting with things such as an in-depth process audit and an energy efficiency audit. This is where we want to start, because we have said to ourselves that we must first optimise the production process, take care of what we have, in order to get down to development. That is the basis.
So the work is now directed towards streamlining processes?
In October, we conducted a process audit at our site. Our aim is to free up spare capacity, increase efficiency at the production sites, improve the organisation and thus lead to better results from this production. This is the basis from which we wanted to start and we are now contracting with our consulting service providers, who are preparing the project documentation for us. This project will be co-funded by the European Union. We therefore need to prepare the relevant documentation in accordance with the procedures laid down by the funding body. We have already held preliminary talks with suppliers, so we already have an idea of what is involved.
This is what we are focusing on now. The call for projects starts in March 2024, so we are using the time until then precisely to prepare the documentation and prepare the company. The situation is dynamic, because we are making decisions on the fly, we are reviewing our activities, so if nothing stands in the way, we will launch the project in the second quarter of next year.
The aim is to improve production and make it more efficient, and does the project also include investment in new technology, specific machinery?
We are investing in technology, specifically storage and slab cutting. Our project aims to increase efficiency in terms of the processing and formatting of wood-based panels in our plant. Of course, it also includes the use of this board, i.e. reducing waste in the process. This is the heart of our investment. Today, we know how sensitive energy issues are and here too, as part of this project, we want to prepare for this, including by investing in a 200 kW photovoltaic station, which will secure us in this respect. It’s a big project, a big financial outlay, and that’s what we’re dealing with at the moment.
This is the best time for similar decisions and development plans. We don’t know what the market will bring us, and the last few years have shown that great flexibility is a factor in staying afloat when others are sinking. At Melaco, of course, we have more ambitious plans – we don’t just want to stay afloat, but to ride the wave and we believe that similar investments will enable us to do so.
In today's world, where every detail matters, furniture manufacturers face the challenge of providing products that not only attract the eye with their uniqueness, but also respond to specific consumer needs and expectations. We invite you to discover with us furniture fronts that transform ordinary spaces into extraordinary places.
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