[Business Scene] Omco Croatia held over 40 percent of the Russian and Ukrainian market. How did it compensate for that?

Despite the pandemic, Omco Croatia has managed to achieve a growth plan of seven to ten percent from the pre-pandemic years over the last two years. Moreover, in 2020, this largest global manufacturer of glass packaging tools seized the opportunity created by disrupted trade links from China to Europe and America by taking on some customers, thereby offsetting the decline in the local market. The fact that the company was cautious is evidenced by the data that the plan for 2021 was reduced due to their customers’ fear of the pandemic. Nevertheless, due to a good tourist season and the return of sporting events, growth was recorded in that year.

Omco Croatia achieved revenue of 814.6 million kuna last year, continuing the growth from previous years. The profit was also convincingly the highest – 148 million kuna, but CEO Darko Ranogajec emphasizes that the last quarter of last year also marked a significant increase in raw material and transportation prices, which had already been rising for the last two years:

– We are now feeling a significant increase in raw material and transportation prices in the last quarter of 2021, when we were filling stocks. Now we feel that inflationary pressure affecting wages, transport, raw materials… Unfortunately, there is insufficient room to pass on costs.

They collaborate with Vetropack and other glassworks, and they are very seasonally dependent because when there is no tourism, production falls. However, as part of the Belgian multinational corporation Omco, they are present in the global market.

– I always like to say, when it is winter in Europe, it is summer in South Africa. This means that with our global presence, we eliminate that seasonal and local effect. This global presence is logistically and commercially challenging due to different price levels, but it is beneficial for reducing the risk of seasonal effects – says Ranogajec.

The crisis in Ukraine has also demonstrated, he explains, the effect of global presence. In the short term, this company from Huma na Sutli was affected by the war as it held over half of the Ukrainian market and about 40 percent of the Russian market, which disappeared overnight. However, global presence allowed it to shift to other world markets and thus compensate for the decline. The share of the Omco group in the global market is 30 percent, while Omco Croatia has 15 percent of the global market and is the strongest member of the Group (when it became a member in 1997, it was the smallest in the Group).

– We export from Australia, Africa… all over the world – says Ranogajec, whose company generated 90 percent of its revenue from exports last year.

We ask how they manage for raw materials since a lot of metal is imported from Russia and Ukraine. He responds that the advantage of his company is that the Group owns two foundries. They are exposed to the risk of metal procurement, but Ranogajec notes that the perception of Russia and Ukraine as countries that are extremely important for metal procurement is incorrect.

– They are important, but they were not so dominant, and we were not even that exposed to them due to the quality of the materials that were not at the level we require. We procure that raw material from South Africa, Canada, Brazil… The problems are indeed increasing as there is a shortage of metal. However, I can say that the price increase is greater than what demand influences, meaning there is speculation involved. Additionally, transportation costs have risen. For example, we paid two dollars per kilogram for air transport, and now it has risen to ten dollars. A shipping container from America to Rijeka cost us 2000 dollars, and now it is 8000 dollars. So, that part also has an impact. But we all overlook the impact of inflation. Those hundreds of printed billions have raised prices – he emphasizes.

Despite everything, Omco Croatia will not stop investments. The reason is, our interlocutor explains, that they want to prepare for the time after. Even in a crisis, modernization must occur to reduce costs.

– If we stop now, we will maintain the technological level for the next few years, and we are already losers when the market normalizes. This means that we must use this time of reduced demand and consumption to change processes, reduce costs at all levels, even with investment, to adapt to this difficult time we live in. We must pay people salaries to live, we must pay more for materials. Thus, only with technology can we compensate for part of the costs – he concludes.

They are preparing a project of 40 million euros over the next three years. They have divided it into a phase of building facilities and a phase of modernization and expansion of production. The first phase will last two or three years, and they will adapt to market conditions over time, but when it comes to modernization, that is, robotization, there is no stopping, Ranogajec is resolute.

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