A new chapter in a growth story Ontex

well as its long-term partnerships with leading providers such as BASF with whom it has been working for more than 40 years.

Russian Coatings is constantly expanding and updating its product portfolio to meet today’s demanding technological challenges.

There are numerous examples of its success in new product development. For example, its Vika brand is gaining market share in Russia and across all the postSoviet territories. Vika is a market leader in high-quality metallic enamels and last year was supplemented with eight kinds of new polyester putties and expanded its range of tinting systems.Today Vika’s distribution network includes more than 50 partners and it is sold in 256 outlets across Russia and the CIS countries. Russian Coatings continues to build upon its growing network of distributors and is now extending its distribution network outside of its traditional markets.

Five year strategy for growth

Russian Coatings’ state-of-the-art facilities and high quality products match the best that can be found anywhere in Europe and its success is inextricably linked to its integrated management system that is endorsed by certification to ISO 9001, ISO 14001, OHSAS 18001 and ISO/TS 16949.

Abramov added, “We understand the tasks before us and these are set out in our five-year strategy for growth. Our primary task is to satisfy the demand for our high-quality, competitive products and thereby increase our sales volumes. In our OEM business sector it is the increase of materials produced using technology from the Axalta company, in the auto-refinish sector – the expansion of our mix-systems and assortment of varnishes and primers under the brands Vika and Guntex, in the industrial paints sector – broadening the scope of application for anticorrosive materials ProdecorTM. This will help us to drive our future sales forward. “However, we also strive to create the best conditions for the development of our employees’ skills and to increase production efficiency based on ‘lean manufacturing’ principles, to involve our people in a more active lifestyle of sport, culture and leisure.” n

For further details of Russian Coatings innovative new products and customer services visit: www.ruskraski.ru

A NEW CHAPTER IN A GROWTH STORY

Some eleven years after it was taken into private ownership Belgium’s Ontex is a public company once more. It sees its new access to capital markets as a key advantage in improving what is already an impressive growth performance. Peter Mercer reports.

IN June of this year, Ontex, the Belgium-based manufacturer of hygienic disposable products, completed a successful IPO on the Euronext Brussels exchange. A total of some 33 million shares were sold, resulting in gross proceeds of about €600 million.

“This was a landmark day for Ontex, its employees, customers, consumers and shareholders as the business returned to the Euronext exchange,” says Charles Bouaziz, CEO of Ontex. ”Our main shareholders, Goldman Sachs and TPG, who bought Ontex in 2010, saw that with the company on a firm growth path, this was a good time to return to the market. We will benefit from a greatly reduced level of debt and will have access to an additional source of capital, which is important as we want to invest in growth. Our two largest shareholders still hold 45 per cent of the company, while the IPO has led to a diversification of ownership, an improvement of our corporate ratings and enhanced our attractiveness on the market.

“Over the last few years our business has expanded its geographical presence - both organically and through acquisitions - and has increased the weight of our own brands and incontinence products in our mix. We aim to deliver both top and bottom line growth,

providing high quality and innovative hygiene solutions to our customers and consumers, further developing the brands of our retail partners as well as our own Ontex brands.”

Global reach

Since it began as a family company in Belgium in 1979, Ontex has grown into a truly global business. Today it has a total of 15 manufacturing facilities in 12 countries across Western and Eastern Europe, the Middle East, Australia and China. It employs more than 5000 people across the globe and generated sales of €1.5 billion in 2013 in over 100 countries.

Ontex’s core business is built around three categories – products for baby care, adult incontinence and feminine care. Baby care products, mostly nappies but also baby pants and wet wipes, currently account for more than 50 per cent of revenue. Adult incontinence products, such as pants, towels and bed protectors, make up some 33 per cent and feminine care products, such as sanitary pads, panty liners and tampons, add up to around 13 per cent.

Ontex is headquartered in Erembodegem, near Aalst in Belgium, and its 15 production facilities are located in Belgium, France, Germany, Spain, Italy, Czech Republic, Algeria, Turkey, Pakistan, China and Australia. The company also reaches its customers through 23 sales and marketing teams across Europe, Asia, Africa, the Middle East and Australia.

Brand strategy

Across the world Ontex sells its products primarily to major retailers. More than 60 per cent of these sales are of retailer brands and the rest are Ontex’s own brands. The company’s core strategy over the years has been to develop deep relationships with the major European retail chains such as Ahold, Aldi, Auchan, Carrefour, E. Leclerc, Lidl, Metro, Rewe and Tesco, helping them to establish or enhance their own branded product lines. The large number of retail partners means that the total business is significantly diversified, with the largest customer accounting for only 6 per cent of the company’s revenue; indeed the ten largest customers together account for less than 40 per cent of total sales by value.

“When Ontex was created in 1979 the business was wholly focused on production for retailer brands,” explains Charles Bouaziz. “More recently, however, two factors have driven the development of Ontex’s brands– our expansion outside western Europe, in countries such as Turkey, Russia and Pakistan, and our growth in the adult incontinence market in Europe, where through acquisitions such as that of the Italian brand Serenity in 2013 we have greatly expanded our presence. The Serenity business now accounts for one third of our total Healthcare business, that is the sales and delivery of our products to nursing homes, hospitals and to consumers’ own homes. The acquisition has also delivered important financial and operational synergies, helping to drive efficiency in production and procurement, and bringing us expertise in product development and home delivery systems.”

Ontex’s own brands also include Moltex, a top-quality eco-nappy that was invented and developed in Germany, and is made with sustainable raw materials to appeal to environmentally conscious consumers. The Helen Harper range of babycare, feminine care and adult incontinence products offers top performance quality at attractive prices to consumers across eastern Europe and in

Russia. The Canbebe brand was acquired by Ontex when it moved into Turkey in 1990 and is now a leading regional babycare brand that is widely distributed in many markets in the Middle East and Africa.

Expansion and diversification

A major element in Ontex’s continued growth and profitability is that its business is geographically diversified. In 2013 some 68 per cent of revenue was generated in Western Europe, around 13 per cent in eastern Europe and the rest in the Middle East, Africa and the rest of the world. This strategy of global expansion and diversification has undoubtedly played a major part in the company’s success in growing its revenues between 2003 and 2013 at a compound annual rate of 7.2 per cent, including acquisitions. What this means in simple terms is that Ontex has doubled its revenue over the last ten years.

This strong performance has continued into 2014. Ontex group sales in the first half of the year of €809.9 million represents an increase of 11.2 per cent compared to the first half of 2013. Even in the mature Western European market, sales grew strongly by 8 per cent year-on-year while growth markets such as Central Europe saw sales increase by as much as 24 per cent. In the MEA region Ontex strengthened its position in Turkey and achieved a strong performance in Morocco and Pakistan.

“Our performance in the second quarter of 2014 was a continuation of the trends seen in 2013 with a robust performance across all our key product groups,” says Charles Bouaziz. “In our mature markets we have continued to support retailers in the development of their brands and to help them to take the opportunity presented by the withdrawal of the US company Kimberly Clark from the Western European market. In our MEA and other growth markets favourable demographics and the development of our own Ontex brands has delivered very strong top line growth. With our continued focus on sustainable growth, we have leveraged this performance to deliver improvements in profitability whilst adding additional capacity to support future growth.”

R&D and marketing

A key element in this sustained performance has been Ontex’s continuous investment in the development of its products and in the expansion and updating of its manufacturing facilities. “Our annual revenue growth of some 7 per cent over the last ten years has enabled us to maintain a constant level of investment at around 3 per cent per year of revenue,” says Mr Bouaziz, “and now thanks to our engineering know-how, we manufacture some of our own production lines – it is quicker than buying in machinery and we know exactly what we need.”

A steady flow of innovation in babycare, feminine care and adult care also plays a vital role in the company’s success. It’s three R&D Centres in Belgium and Germany develop solutions to keep the company’s retail partners competitive in terms of performance, value and consumer satisfaction.

“Understanding customer preferences is just as important as technical excellence,” says Mr Bouaziz, “so soon after I took over as CEO in 2013 I recruited a head of marketing and strengthened the marketing team. Success in this business today is not just about delivering an excellent product; it’s also about fully understanding changes in customer demands and hearing the voice of the consumer. To do that we have to work closely with our retail partners, our suppliers and with other sources of knowledge in universities and technical institutes.”