Germany Cries Out for Cables, and the Factory in Jakovlje Has the Answer

All roads once led to Rome, and today all cables lead to Germany. At least those produced in the factory of Eurocable Group in Jakovlje, from where the entire or almost the entire produced assortment has recently been sold on the German and Austrian markets, where they are installed in residential buildings, energy distribution systems, industrial plants, and transport infrastructure. Maximum reliance on exports, without much noise, is a comprehensible strategy in a market where domestic demand has yet to reach its full potential. It also hides some traps, but thanks to experience from Germany and Austria, which it has managed to circumvent, the future of Eurocable Group is now focused on continuing its expansion into Western Europe.

– In our main export market, Germany, there is strong and long-term demand due to the modernization and expansion of the electricity grid and the integration of wind and solar energy. Challenges include competitive pressure on prices and requirements for certificates and compliance with European and German standards, in which we are competitive. The Austrian market is also regionally important to us, where demand is growing moderately and steadily, driven by the renewal of the distribution network, energy efficiency of buildings, and local projects related to renewable energy sources. In that market, we focus on quality and standards similar to those in Germany. In the long term, we plan targeted and phased expansion into Western Europe, in countries where EU programs and investment plans create demand, especially for specialized cables. We expect to retain major customers in Germany and Austria and the possibility of expanding our portfolio while optimizing costs – stated the management of Eurocable Group to Lider.

Twenty Computer-Controlled Lines

It is indeed rare for a Croatian company to explicitly state that it exports absolutely all of its production, but Eurocable does just that. Its presence in the German and Austrian markets is certainly a good starting point for further export expansion because, in addition to the specific quality requirements of those countries, they together form a strong economic bloc, making cooperation with their companies a good recommendation for entering new Western European markets.

It all started in 1999 when Ernest Tolj founded a company for the trade and distribution of electrical cables. Production began three years later when the plant in Jankomir was completed. After expanding the capacity of the Jankomir plant in 2004, in 2011 the company built a new factory in Jakovlje, a place about twenty kilometers from Zagreb. This facility spans 10,000 square meters, housing 20 computer-controlled high-speed production lines with in-line quality control throughout all stages of production. The annual capacity of these lines reaches a total of 30,000 tons of finished products or cables. Broken down, the Jakovlje plant can produce 15,000 tons of copper wire, 1,500 tons of aluminum, and 8,000 tons of PVC granulate annually, in various formulations and in accordance with cable standards. The vertical integration of the company’s production process allows it to produce key cable components itself: copper wire with a diameter of eight millimeters and PVC granulate. This technological foundation gives it an advantage as it can manage the entire production cycle, unlike manufacturers who depend on external suppliers even in that part.

Eurocable’s finished products include installation wires up to 750 V, energy cables for voltages up to one kilovolt, and conductors and ropes made of copper, aluminum, and aluminum alloys. They are used in electrical installations of various types of buildings and energy lines, industrial plants, and for grounding electrical systems. For an additional leap into the Western European market, investments will be needed. As communicated by the two-member management of Eurocable Group, led by Tihana Stupinšek and Mihael Marić, with equal authority but different scopes of work, the company has decided to invest in strengthening its own capacities rather than in acquisitions.

– Our priorities are strengthening vertical integration, especially investing in our own wire production for price control, supply stability, and cable quality. We plan to modernize production equipment and increase capacities for the growing demand, especially in Western Europe. For now, we do not plan acquisitions; we are focusing on organic growth and developing partnerships – stated Eurocable Group.

Elka Is Not Competition

Lider’s financial expert Nikola Nikšić, owner of the consulting firm Konter, has also noticed Eurocable’s investment potential. He noted that the company has recorded relatively modest gross investments in fixed assets over the past five years, around 2.1 million euros cumulatively in machinery and equipment, indicating that the next investment cycle will accelerate the transfer of funds from cash flow into production capacities.

In the activity of producing other electronic and electrical wires and cables, this company is among ten others. Last year, this sector collectively employed more than 700 workers, achieving total revenues of 211 million euros with an average annual growth of nearly 15 percent over the past five years. Meanwhile, the companies achieved a total profit of 10.6 million euros last year. Eurocable Group ranked second in total revenues in the sector with 45.9 million euros and a share of 21.8 percent (with an average five-year revenue growth of over 21 percent), while Elka is dominant with 128.2 million in revenue and a share of over 60 percent. The other nine companies have a share of only 17.3 percent in total sector revenues. Therefore, it is clear why Eurocable Group does not consider Elka a threat, nor the new regional player TT Kabele.

– We export one hundred percent of our products; the domestic market is not primary. We do not perceive Elka as competition due to the different portfolio. Our products are unique and recognizable, and behind the name stands a quality product and skilled workforce, which ensures a competitive advantage and customer trust in foreign markets. We view the emergence of TT Kabele as a natural market dynamic, not a threat. The strategy remains unchanged: we focus on product quality, long-term partnerships, and timely deliveries, while respecting European standards – stated the management of Eurocable Group.

To clarify, Elka primarily deals with medium and high voltage cables, and after the Slovenian Iskra Group acquired the company in 2021, it can be expected to focus more strongly on high voltage structure projects, which means it will bypass the market where Eurocable Group competes.

Price Volatility of Inputs

In the case of Eurocable Group, the usual vulnerabilities of an export company are at least partially mitigated because this company operates in a financially healthy market in Western and Central Europe, where there is no currency risk, and European funds are used for the renewal of electricity infrastructure. Therefore, potential vulnerabilities of Eurocable Group do not come from competitors and export positions, but from within.

As noted by Nikola Nikšić, labor costs – salaries and compensations – increased by 12.3 percent in 2024 compared to 2023, and over five years, they have increased by an average of 14.1 percent. The number of workers based on hours worked has not changed significantly, so the rise in labor costs is due to the increase in salaries and compensations, which averaged 1,742 euros in 2023 and 1,969 euros in 2024. For the entire sector, the average monthly net salary and compensation for those two years were significantly lower, 1,266 euros in 2023 and 1,492 euros last year.

Along with the rise in labor costs, the main cause of which is the shortage of qualified personnel, Eurocable Group is also sensitive to the volatility of other input costs. Copper is covered by natural hedging, but other materials and energy will remain a source of pressure on margins. How volatile these costs are is shown by the fact that in 2024, raw material and material costs rose to 33.4 million euros compared to 26 million in 2023. This has also eroded margins as EBITDA fell from 7.54 million euros in 2023 to 4.82 million last year. Vulnerability also arises from the low share of own sources, only 16 percent in the total financial structure, which limits the possibility of faster and stronger jumps without a structured capital plan.

Only Two Days for Collection!

Despite the pressure on profitability, the company has managed to shorten the operational cycle from 29 to 24 days and has significantly accelerated the collection of receivables – from eight days in 2023 to just two days last year. Financial indicators support a generally conservative approach to management, so the net financial debt of 11.43 million euros represents 2.4 times EBITDA, which is within an acceptable range that allows for further borrowing for development needs. Meanwhile, the company has cumulatively generated 15.5 million euros from operational cash flow over five years, directing 11.6 million euros into financial restructuring.

– From 2014 to 2016, we faced market and financial challenges, which led to a pre-bankruptcy settlement. The experience taught us the importance of financial discipline, market diversification, and transparency. Today, we manage risks conservatively, balance funding sources, maintain liquidity, and invest in long-term valuable projects. We balance risks by diversifying customers and collaborating with reliable partners while focusing on markets with clear investment plans in energy infrastructure and renewable energy sources. For now, we do not plan to increase our domestic share; the focus remains on exports and expanding into new Western European markets for stable and sustainable growth – stated the management of Eurocable Group.

Along with vulnerabilities, Eurocable also has sufficient opportunities that provide a very good chance for continued growth. Networks are being modernized across Europe to achieve new standards of safety and resilience needed due to increased demand for electricity. Part of that story is the energy renovation of buildings, which requires higher quality wires that Eurocable Group offers: waterproof, fire-resistant, low-smoke, and halogen-free. It can be expected that part of the new demand will also come from Croatia in the future, which must eventually decide to modernize and expand its distribution and electricity grid. Opportunities will also arise in the future in the development of offshore wind farms, for which special submarine cables will be needed, but the company is not pushing into that story for now. The reasons are clear: it is capital-intensive, and the outlines of potential projects are just beginning to emerge on the horizon.

Goal: Greater Application of AI and IoT

As stated by the management, the ESG component is also important in their strategy. In accordance with it, they are focused on reducing carbon dioxide emissions, waste, and energy consumption, using recycled components and cables that do not contain halogen, recycling more than 95 percent of production waste, and optimizing water and energy consumption.

Overall, the future looks good for Eurocable Group. Lessons learned from financial difficulties are always experiences that change and discipline business, and the growing demand due to the renewal and expansion of European energy infrastructure guarantees stability. There is room for improvement in further automation, greater application of AI and IoT for industrial purposes, and increasing capacity, which is, after all, the goal in the next investment cycle.