Polish distributor sees pandemic hitting expansion plans

The Covid-19 pandemic could halt the positive trend seen since the start of 2020 in Poland’s construction industry, which would in turn hamper Drozapol’s performance, the distributor says. The firm continues its focus this year on expanding its product offering and securing new customers.

Drozapol’s consolidated revenue dropped -20% on-year in 2019 to PLN 123.4 million ($29.3m) and the firm sunk to a PLN 4.4m loss versus a PLN 220,000 profit a year earlier. Over 99% of sales were to the domestic market.

Drozapol obtained state funding in 2019, as part of an export fund for small and medium sized businesses, in order to help it realise its “Internationalisation Strategy” project to sell construction reinforcement abroad. However, the disruptions caused by the pandemic could significantly hamper this project’s progress, the firm says.

The company still plans to expand to its construction reinforcement production capacity in future. In the immediate future it plans to focus on sales of higher-margin products such as pipe and profiles.

The firm reduced purchases of imported material by -40% on-year in 2019 to PLN 66.14m and bought 8% more from the local market at PLN 23.15m. Drozapol increased purchases at the end of 2018 to secure material and stock up inventories in order not be caught out by the rapid exhaustion of EU safeguard quotas in 2019, the firm says.

However, the decline in demand in 2019 impacted the structure of procurement, as well as shipment volumes, and saw inventories remain high for a long period of time. The firm’s main suppliers were from Turkey, Romania, Switzerland and Belarus.

“The firm’s activity is to a certain extent dependent on the situation in the construction sector, for whom a very difficult period is likely to be in store after the epidemic,” Drozapol says in a report seen by Kallanish. “We are already seeing the significant outflow of foreign workers and the zloty’s steepest fall in years.”