Georg Grassl, president of Henkel Serbia - We plan to make multi-million investment in factories in Krusevac and Indjija

(Georg Grassl)

When it bought Merima in 2002, Henkel had a vision to make that company a supply center for 55 million consumers in the region. During these ten years, Henkel has invested EUR 130 million in factories in Serbia. Its production totalled 171,000 tonnes last year, and 40 percent of products were exported to 15 European countries. People at Henkel Serbia plan to boost exports and enter new export markets. They also announce two new lines in the Krusevac-based factory and consider investing in another factory in Indjija.

In an interview with eKapija, Georg Grassl, president of Henkel Serbia and a member of the Managing Board of the Foreign Investors Council, speaks about the 10th anniversary of operations, new investments, and advantages and disadvantages of doing business in our country.

eKapija: What is it that has marked the first decade of Henkel's operations in Serbia? What are, in your opinion, the company's greatest achievement in this period?

- In 2002 we invested into a privatization in Serbia with the clear vision to become the supply center for 55.000.000 consumers in the region. During that time we have been focusing on development and investments into the modernization of the production by improving production processes and implementing the latest technologies for sustainable development which brought significant increase of the production volume. Today, Henkel Serbia operates in 3 locations in Belgrade, Kruševac and Inđija and achieves excellent business results in each one of them.

After ten years and a total investment of 130 Mio EUR we are proud to say that our target is achieved and that we export our brands from our Serbian factories to 15 regional and European markets. Moreover, the privatization of Merima in 2002 is considered to be one of the most successful ones in Serbia until today.

eKapija: You have announced an investment of EUR 7.5 million in two new production lines in Henkel's factory in Krusevac. What new products can we expect?

- That is correct. This year we invest 7,5 Mio Euro into two new projects in Kruševac and create at least 30 new working places. The first investment is a new production line of Bref while the second project will be finalized by March or April next year. There we will make a product innovation with latest technology.

eKapija: Are these products intended for our market or for export (to which countries)?

- We intend to supply not only regional markets but also EU markets from Krusevac. At the moment, we already export our brands from our Serbian factories to 15 regional and European markets such as Albania, Austria, Bosnia and Herzegovina, Bulgaria, Croatia, Hungary, Macedonia, Montenegro, Poland, Romania, Ukraine and others. We will extend the list of export countries by the new production lines and deliver to more EU-countries.

eKapija: There has been announced the construction of the third factory in Indjija. When do you expect it to start? What will be produced at the new factory? What is the value of that investment?

- Indjija has proven to have great strategical importance for our business. We are considering further investment and extension of the operations there. As soon as we finalize our project plans for new investments, we will make it public.

eKapija: You have announced an investment in the factory Henkel Ceresit in one of ex-Yugoslavia countries, with the management in Belgrade. What is happening with that project?

- Henkel Srbija carries business responsibility for many Western Balkan countries. We are constantly investigating further business potentials in those countries; a local production place might support exploiting all business opportunities in the region.

eKapija: How many people does Henkel employ in Serbia? Do you plan to hire new workers?

- Our new projects and investments, both in Indjija and Krusevac, imply creating new working places. Our employees are a valuable part of the company and we are strongly committed towards their safety, professional development and trainings. During the period from 2003 until August 2011 we had more than 316 trainings, including over 1,097 participants. It is worth mentioning that only in 2010 Henkel Serbia invested around EUR 130 thousands in employee training programs. We are confident that are new investments will provide new jobs and perspectives to our employees.

eKapija: Which Henkel products made in Serbia are in the highest demand?

- The biggest volumes are made for our brands Persil and Merix in the category of washing powders and for our brand Ceresit in building adhesives.

eKapija: Henkel imports products from other Henkel factories to Serbia, such as Schwarzkopf, Schauma, Syoss, Taft, Palette, Fa, Vademecum and some other brands. Will this list be extended?

- I am sure that in the categories of Beauty Care we will see many innovations under the existing and already well established brands that you have mentioned. We are looking forward to offer to our consumers the best available beauty products.

eKapija: What are the financial indicators of Henkel Serbia in H1 2012?

- Henkel has achieved results above expectations in the first half of the financial year. We had a good start to the fiscal year in spite of a challenging and volatile market environment and we achieved solid organic growth and substantially improved our profitability. In the second quarter of 2012 Henkel’s global sales were 4,206 million euros, an increase of 6.4 percent compared to the figure for the prior-year quarter. After allowing for one-time gains, one-time charges and restructuring charges, adjusted operating profit improved by 18.6 percent, from 514 million euros to 609 million euros, with all three business sectors contributing. Despite rising prices for raw materials and packaging, adjusted return on sales (EBIT margin) increased significantly by 1.5 percentage points, from 13.0 percent to 14.5 percent, while reported return on sales was 13.9 percent.

All three business sectors contributed to this development: Laundry & Home Care registered strong organic growth of 5.1 percent; organic sales growth at the Cosmetics/Toiletries business sector reached a solid 2.8 percent; and the Adhesive Technologies business sector also generated solid organic sales growth amounting to 3.6 percent.

eKapija: How do you cope with the crisis?

- Over the last three years the world markets, including Serbian market, have been facing difficult times. The economic crisis inevitably affected all the spheres of economy and society. However, we remained focused on our goals, we managed to adjust to new situation and we showed that effort and vision, even within the complex times, can bring success and development. Innovations are one of the most important factors of being successful even in difficult macro-economic situations. In 2011 and 2012 we launched several new products such as Persil Compact, Persil Tabs, Bref Superior Value, Somat Express, Syoss Pro nature, Palette Perfect Mousse, Moment Total and others.

eKapija: FIC has presented the White Book 2012. What are the biggest problems faced by investors in Serbia today?

- The business environment in Serbia is quite challenging with a number of opportunities for development. It is a country with great potentials, nevertheless there are stil plenty of possibilities for further improvement .

One of the main difficulties is the administration, both state and local, since it is still complex and too bureaucratic on all the levels. Some procedures take too long and must be simplified and more efficient. Nevertheless, Serbian Government needs to invest and further develop its infrastructure by building new roads, faster railways and better connection to neighboring ports. We also face issues with the entire inspection system and advocate for a change from pre-market to in-market control.

eKapija: Are there any positive aspects of investment in Serbia that you would like to single out?

- Serbia has the capacity to become a strong regional country. It may be considered a small market, but this country lies in the centre of a very big agglomeration of consumers. Within a thousand kilometres radius there are 50 million consumers in countries that are mostly members of EU, or are candidates. Serbia is also considered to be extremely competitive when it comes to labour intensive production. Serbia has to develop a strong self confidence by improving the quality of its production. At the same time Serbia needs to invest into the education of young people to retain them and to avoid further brain drain.

Suzana Obradovic