After the negotiations with the creditors for debt-to-equity swap and the government decision not to grant the second tranche of the state aid, SVEA, the leading Slovenian kitchen maker filed for bankruptcy in December 2013. It is a great opportunity for a foreign investor to acquire the company’s tangible and intangible fixed assets, provide working capital and access to new markets. The company’s highly skilled and dedicated shop-floor workers will spare no effort to make a turnover programme work under new management.
In general, the revival of the wood and furniture industry must be a priority for Slovenia as the government’s focus on overcoming the economic crisis sharpens. After all, Slovenia is one of the most forested European countries. However, it means investments in infrastructure and improvements to the business environment serving to create high value-added jobs. It is a tall order and the Slovenian saw-mills and furniture companies are still struggling with the effects of the transition from a self-contained market to an internationalised and highly competitive one. Many Slovenian homes still display kitchen cabinets made by domestic brands twenty years ago, many of which are now long-gone and SVEA is the latest addition to that list even though it develops new products, adapts to changing tastes and delivers superior quality by the use of the latest technology and know-how of its experienced craftsmen.
SVEA’s 64 years of tradition, many awards for design, exports to 25 countries, 130 skilled employees and sales of 10.8 million euros in 2012, are the figures that guarantee a successful corporate turnaround. SVEA manufactures also other furniture and certified laminated beams for buildings and operates a district heating system. The company is certified to the ISO 9001:2000 standards for a Quality Management System and ISO 14001:2004 standards for an Environmental Management System in line with commitment to sustainable environmental management.
The company was hit hard when in the aftermath of the 2008 crisis its sales plunged from 19 million euros in 2008 to 10.8 million euros in 2012. The credit crunch followed and banks were unable or unwilling to renew or reschedule credit facilities indispensable for providing working capital for the company’s production. As SVEA was unable to obtain material for the production its production capacities could not be fully exploited, the work on the development and marketing of new products ground to a halt and the company’s year-end results were in red ink.
The furniture business has been under heavy pressure from all sides in the value chain and customers constantly looking for the lowest price. Do-It-Yourself (DIY) furniture businesses and cheaper furniture outlets competed with the existing businesses have offered more to customers for less and furniture (especially kitchens) bargaining has spread all over Europe.
However, the outlook of the furniture industry experts towards the future is positive and there is a strong conviction in the results of a turnaround plan expected from the new owner.
Before SVEA fell victim to the economic crisis, it secured its foothold in the upper-medium range of products, offering a turn-key service from consulting and measuring to final installation of its kitchens and other furniture – all included in the price of the product. As a bespoke furniture company with a strong engineering team capable of delivering solutions also for other segments of the construction industry, SVEA took particular pride in making customised kitchen sets similar to those made by small carpentries but with much stronger technology and knowledge base. SVEA kitchens have become a status symbol and have found buyers in the discerning markets of the Netherlands and Belgium where the SVEA brand is sold both in its own furniture stores and in department stores and specialty retailers alongside other furniture manufacturers.
SVEA’s kitchens are admired for their modern design using clean horizontal lines but the time-honoured traditional styles in cabinetry are always available. SVEA is not a global producer engaged in high-mass production that carries out production in countries with low production costs. Cost-effective as it may be, such companies are much less flexible when it comes to new costumers requirements and it is exactly SVEA’s competitive advantage: own product development from a concept to delivery, as well as flexibility with short response time and a lean operating structure.
SVEA was incorporated as a public limited company, but its shares are not traded on the stock exchange. The shareholdings held by the company’s employees, former employees and retired workers add up to 76 per cent of the company’s equity. Recapitalisation in the range of 5 to 10 million euros would get the company back on track. A potential acquirer will have to address the company’s insolvency, strengthen its operations and continue to provide its customers with the highest quality products and service that they have come to expect from the SVEA brand: from classic styles to high-gloss contemporary styles of handle-less kitchens and other pieces of furniture. In return, there is a positive outlook for the business after the subprime crisis has dealt a heavy blow to the housing market and consumer confidence. Real estate prices are recovering and property developers are ready to de-frost their projects. Fitted kitchens and other furniture made by bespoke furniture companies such as SVEA are poised to bring hefty returns to a smart investor.
Advantages of the investment opportunity
When raw material costs keep rising, manufacturing good furniture to be sold later on at slashed prices has had devastating effects on SVEA as a premium furniture company after
the housing boom was replaced by the economic gloom. SVEA’s philosophy is to design and manufacture furniture to exacting standards, using carefully selected raw materials, and traditional joinery techniques that have evolved and advanced over the last 60-odd years. The result is high quality, modern furniture built for a long lifespan – the best value for money.
A long industrial tradition in furniture and joinery making plus its vast wooded areas make Slovenia a prime location for a profitable brownfield investment. The SVEA brand is associated with premium home furniture: kitchen, bathroom, bedroom and bathroom. The company also engages in manufacture of industrial products and furniture for hotels, provides customised solutions, glued beams and other solid wood products. Out of more than 73,000 sq. m. in total area, the state-of-the-art production area extends over 33,500 sq. m. Croatia, the Netherlands, France and Canada are the biggest markets for SVEA’s veneer and solid wood products but its buyers Slovenia account for a hefty third of the company’s sales.
In addition to its plant and equipment, SVEA’s people are the company’s most valuable asset. Skills accumulated over the decades in the furniture-making business and engineering competencies coupled with loyalty, dedication and commitment will jump-start the company for the new owner.