Franjo Sobočan: Today, no one knows the true price of products

At the panel 'Investors and Good Practice Examples' held as part of Lider Invest in Mursko Središće, Franjo Sobočan, owner and founder of Sobočan, and Igor Vlahović, CEO of Press Glass shared how they survived the last two crisis years, what they expect from this year, and whether it is worth investing at a time when recession is knocking at the door, supply chains are broken, and uncertainty looms due to the war in Ukraine.

After two years of pandemic and reduced investment activity, both companies are presenting optimistic forecasts despite negative global economic trends. Sobočan states that the return of tourism is very important for the recovery of their revenues to pre-pandemic levels.

– A good part of our revenue comes from tourism, specifically from equipping hotels and hotel chains, which has not been present in the last two years, so this year is already much better than expected – said the founder of Sobočan.

He adds that they also feel the disruptions in supply chains, primarily due to certain wood materials and raw materials that have been arriving from Russia until now. Because of this, Sobočan says they were forced to increase their stocks as well as working capital due to irregular supplies and rising prices.

Vlahović also stated that Press Glass has exceeded its plans and that the planned growth compared to last year was 15 percent, while the quantity produced in the first four months is 50 percent higher than last year.

– We supply the construction sector with materials, and this year in the first four months we had to activate all lines and hire new people to meet market demands – said Vlahović.

Press Glass, as part of the group, also ensures 8.5 percent of the total group’s revenue, so as a large buyer, it has centralized procurement and better positions, which makes its operations easier. Although they also feel minor issues due to the lack of raw materials, their customers do not feel it.

Regarding the price increase of the products themselves, Sobočan says that last year it was a significant problem, but that this year the situation has already improved, not because of the price, but because no one knows the true price of the products anymore. Everyone expects prices to constantly change, so it is no longer such a stress and problem, Sobočan believes.

Vlahović adds that in the last two years, the price of raw materials has increased by 65 percent and that the share of raw materials in Press Glass’s revenue is more than half. This means that raw materials are 'eating' their profit, so they are also forced to raise the prices of their products.

Recession at the Door

In the upcoming period, despite a possible recession, Sobočan expects better times.

– We estimate that the hard years are behind us. The EU has begun to realize that it was too dependent on Russia and China, so now many are bringing their production back from China to the EU. China is no longer that cheap, and that works in our favor. The countries where we operate practically no longer have their own production. And I am talking about Germany, Italy, Austria – says Sobočan, adding that when partners from Germany visit Sobočan, they are astonished to see young people at the machines, as they no longer have that, which is a significant advantage.

Vlahović says that the Chinese have never been their competition, so they do not gain much from their policies.

– As far as our industry is concerned, some statistics predict that glass processing will grow by 5 to 7 percent in the next five years, so if we look long-term, Press Glass has a bright future, especially in construction.

New Investments

Despite the crisis, Sobočan has spent the last five years continuously investing, and the investment strategy has been focused on digitalization, green energy, and innovation and development. They recently opened their own solar power plant, and by 2024, they plan to invest 45 million kuna in two production lines (one for wood, the other for metal) that will be at a high 'software' level, achieving greater productivity as well as production volume. This will be progress in production automation.

The company Press Glass is also not stopping its investments. They state that they are modernizing production lines, machines, and the vehicle fleet. Within the entire group, there is still significant growth, concludes Vlahović.