Rand Sherif, Interbrands: Market has lost its sparkle since December

Interbrands, the biggest consumer goods distribution business in Romania, posted 1.17 billion euros (4.3 billion RON) in sales last year, an increase of 12% in euros compared with 2007, when it first overshot the one billion-euro mark.

Its EBITDA fell from 27 million RON (8.2 million euros) in 2007 to 15 million RON (4 million euros) last year. “The halving of the EBITDA and the fact that we did not return to profit in 2008 can be blamed mainly on the increasing cost of working capital, and exchange losses on euro loans,” said Rand Sherif, Interbrands CEO. He added that the impact of the two external factors on the profitability of the company was lessened by the steps taken over the last two years, which pursued a reduction in the overall debt and in the operating costs. The company posted 0.8 million-euro financial losses in 2007. In early 2008 Sherif forecast the company would become profitable by the end of the year. In the second half, however, the business growth slowed down, as a result of the worsening economic conditions. The company posted 23% full-year growth in RON, after the growth in the first six months had stood at 27%. “The first signals were observed particularly in December, when we really felt a difference. There is no sparkle any more: the dynamism we had in the last 2-3 years is clearly not in the market any more,” Sherif said. He expects to see zero growth or even a slight decrease in the local FMCG sector this year, with some categories suffering more than others. The biggest supplier of Interbrands is British American Tobacco, a company that derived almost one billion euros in sales in Romania. The distributor chose to go for partnerships with top producers from the beginning, so that its list of suppliers also includes P&G, Nestle, Cadbury and Vodafone. “In our portfolio, there are some categories that are suffering more, such as white goods (Braun), but others, such as cigarettes or shampoos, could be affected insignificantly by the market conditions and might do surprisingly well,” Sherif said, adding that he could not provide estimates about the company’s performance in 2009 because predictability had diminished.