Delta Distribution's strategy after insolvency

Delta Distribution, the biggest distributor of ceramic tiles on the market, with 40m-euro annual turnover, is to reorganise its business in the next three years, after having become insolvent, by dropping low-price products and distribution to other stores.

The company in late January had been declared insolvent following a lawsuit filed by Austria’s Lasselsberger ceramic tile producer, which asked for debts of around 10m euros to be paid out. “(…) At the moment Lasselsberger filed the insolvency request, the market situation was highly positive and I was confident we stood all chances to win. However, as the crisis has deepened, I devised a reorganisation plan for our firm and talking with our receivers, I realised insolvency was a way to protect a company, especially during a crisis,” says Dragos Bonea, chairman and the majority shareholder of Delta Distribution. The company last year posted turnover worth some 150m RON (40m euros), flat from 2007, and expects the figure to drop by around 30% this year, to 105m RON amid activity restructuring. “Turnover will shrink by 30% this year as we’ll give up the low-price segment, while our operating margin will rise as we’ll focus on the medium and luxury segments,” Bonea explains. As a matter of fact, the company has also launched its own ceramic tile label, Decogres, to be distributed in DIY networks. Since the trial started, Delta Distribution has closed six stores as part of its reorganisation plan and is to lay off around 100 employees. Still, the company will open two large stores in Iasi and Bacau, as part of an investment programme worth around 10m euros it started two years ago. The company last year opened, in Razoare area of Bucharest, a store called Delta Concept Store, in which it invested around 6m euros, inclusively in land acquisition. According to Bonea, for a profitable firm, insolvency means in fact protection against some short-term debt, which can be paid to suppliers on a longer term, of around three years. Debt maturing at the time of insolvency is paid only on the basis of a three-year reorganisation plan. Current debt must be paid in time, though. Delta Distribution was set up in 1996 by Dragos Bonea together with two associates. In November 2004, the two withdrew from the business after selling a 45% stake to an offshore firm, which subsequently sold it to Poland’s Weston Holdings.