Pehart Tec Group in Romania moving full speed to become dominant player in southeastern Europe

Following a systematic growth plan in which it has started four tissue machines over 10 years, Pehart Tec Group, comprising Samus Constructii, Metalicplas Impex, Metalicplas Distribution and Pehart Tec, has become the largest player in the Romanian tissue market. We recently spoke with group president Ioan Tecar who outlined where its tissue business has come from and where he hopes to take it.

Perini Journal

Mr Ioan Tecar, the president of Pehart Tec Group, is both very enthusiastic and very clear about the advantages that his company has regarding the tissue markets in southeastern Europe. “We feel we have several strong advantages in this growing region of southeastern Europe. Due to our central location, we can supply both Romania and the surrounding countries quite easily and therefore get an advantage on transportation costs. In addition, our labor costs are very good as well, and for energy and gas the prices are quite competitive compared to some of the other European countries. Finally, we have some of the most modern tissue machines and converting equipment in the region so we can compete very well with almost everyone in Eastern Europe.”

OLD MILL WAS START OF NEW BUSINESS. With a tissue production capacity of jumbo rolls now reaching over 100,000 tons per year, Pehart Tec Group is by far the largest tissue manufacturer in Romania. However, the tissue business started on a very small scale just over 10 years ago when, in 2005, Mr Tecar bought a very old paper mill, Pehart SA, located in Petresti, in Alba County in central Romania. With the acquisition of the factory, its name was changed to Pehart Tec SA. The mill had a history going back 137 years but when he bought it, it was abandoned and closed. The plant had two old paper machines as well as a molding machine for making egg cartons. One of the paper machines was a tissue machine and the other was for MG paper.

A LEARNING EXPERIENCE WHILE LOSING MONEY. Mr Tecar explains the situation at that point: “In 2005, just after we bought the mill, we looked at the market for tissue products and saw opportunities. So we got the old tissue machine running but the operations at the mill were a disaster both with respect to quality and energy consumption. Especially the energy and gas consumption was very high. So we were running the machine and exploring the market for two years but losing a lot of money.” “This turned out to be a good learning experience in tissue which helped us to understand the market dynamics both in Romania and in the neighboring countries. So, after analyzing the situation, we thought it was worth investing in better equipment to grow in the market.”

BIGGER INVESTMENTS STARTED COMING. Therefore, during 2006-2007, a modernization was carried out on the old 2.65-m wide Beloit tissue machine which dated from the 1970s. This extensive rebuild was done by OverMeccanica which brought the machine speed up from 500 mpm to 1300 mpm. Production rose from about 600 tons per month to 1,700 tons per month of jumbo rolls which were sold to converters. At that time the company was doing no converting, but was making only jumbos and was easily able to sell them all. Following the rebuild of the tissue paper machine, the situation began to look much better as Mr Tecar saw that the tissue market in Romania and the surrounding countries was increasing quite nicely. And Pehart Tec SA was able to supply those markets and grow the business now that its production costs were under control and the quality of the paper was improved. Next, in 2008 the company decided to make a major investment of € 25 million in a new PM and a new converting machine, as well as some work to modernize other existing assets and infrastructure. “In 2009,” explains Mr. Tecar, “we started up a new Toscotec machine in the place where the old MG machine had been located. This was our second tissue machine and it could run 2,000 m/min with a width of 2.75m. So this meant our total tissue capacity was 50,000 tons per year and our converting was 10,000 tons per year. A year later, all of our tonnage was again sold out. At that point, we were able to attract an important partner, the European Bank for Reconstruction and Development (EBRD), who stood next to us for six years until the modification of shareholdings in 2015.”

A GOOD PROBLEM LEADS TO GREENFIELD SITE. With all his tonnage sold out, Mr Tecar was once again facing what could be called a “good problem” – he had strong demand for his products but he didn’t have enough. The solution was to make plans for a completely new greenfield tissue mill site which would eventually double the company’s output. A location was chosen in Dej in Cluj County, about 150 km straight north from the Petresti mill and 50 km north of Cluj-Napoca, Romania’s second largest city. The new greenfield plant was to be built in two phases and the investment cost eventually amounted to about € 50 million. The plan was to build two tissue machines and two converting lines. Phase 1 comprised the civil works, the machine halls and the basic infrastructure, as well as a tissue machine from ABK (the former Over Meccanica) and the converting line from Gambini. This equipment was started up in 2013. Then, in the most recent project which is phase 2 at Dej, developed at Metalicplas Distribution, a new A.Celli (see page 102) paper machine has been installed and is up and running. PM 4 is 2.8-m wide machine with a maximum speed of 1800 mpm and was part of a complete turnkey project that included the Crescent former PM with15-foot Yankee dryer and the latest-generation hood design, stock preparation handling for both short and long fibers from 100% primary pulp, control and automation systems, the reel handling system and the slitter/rewinder.

SMOOTH START AND GUARANTEES ACHIEVED. Mr Tecar comments on the way the company has grown and on the PM 4 project. “We have started up four tissue machines from four suppliers over the past 10 years. And we have worked well with all of them and had a great experience with each of them. PM 4 was a particularly fast project with the time span between the delivery and start up only five months. We reached our objectives faster than we thought we would and right now the A.Celli machine is producing at 1,800 mpm.” “When we made the performance tests on the machine, I’m pleased to say that this new machine achieved the guarantees from the very beginning, which is unusual. This concerns both the paper quantity and quality, as well as the energy consumption specifications. So we are very happy with the way the machine has started up and the entire project has been a success for both us and the supplier.”

FREQUENT GRADE CHANGES. Flexibility and ease of changing between grades and grammages is extremely important for the Pehart Tec Group since it is supplying a wide variety of converters in different countries. These converters can be both large or small and have widely varying demands for the paper qualities and grammages. Mr Tecar says that the A.Celli machine provides them with a big advantage in this respect. With the start of PM 4 total production capacity is now over 100,000 tons of paper in jumbo rolls, and converting capacity is between 30-40,000. The jumbo rolls are targeted at toilet paper and kitchen towel grades, while the converting lines make toilet paper, kitchen towel and handkerchiefs. The jumbos are sold to converters, with about 30% staying in Romania and the remaining 70% being exported to various neighboring countries such as Bulgaria, Moldova, Greece, Hungary, Poland, Serbia, Czech, Switzerland and Turkey. Converted products stay in Romania and are sold to domestic retailers. Pehart Tec Group produces two of its own brands called Pufina and Alint and these make up about 30% of its converted production, while the remainder is private label made for retailers. However, Mr Tecar says that the percentage of its own brands is growing and he hopes it will reach 35 to 40% in the near future. Raw material for all of the Group products is primary fiber pulp.

OWNERSHIP STRUCTURE CHANGES IN 2015. During 2015 some changes were made to the company ownership structure. Previously Mr Tecar had owned 75% of the company and the European Bank for Reconstruction and Development (EBRD) had 25%. Then last year, as part of a plan to grow the company in the hygiene products sector, he made a partnership with Abris, an investment fund based in Poland. Today Abris is the majority shareholder in the business and the outlook is good, explains Mr Tecar. “Obviously, the pace at which we have been investing to grow the tissue business means it is a profitable sector for us. As a matter of fact, the group also has other businesses that we could invest in but tissue has taken priority due to the good returns it has given and positive growth outlook we see for the future. Now we are focusing on other investments, which I prefer not to talk about right now but you may hear about in the near future. In addition, to continue our growth we are considering the possibility to buy competitors both here within Romania or in other areas of southeastern Europe.” *

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