In the chimneys of Europe – Kompozitor
Hungarian family business finds solution in the chimneys of Europe
Source: http://www.uzletresz.hu/ – JANKOVICS SOMA
Following the collapse of Ikarus, the manager of Kompozitor Kft, the company seeking market opportunities gained an idea from the fire-wall opposite to their site, with which a European success story came true.
With its unique chimney liner technology, the company has been reaching success in most of the European countries. Only Germany is still out of the greatest markets of the continent, which has been withholding due authority licence for 13 years. Then, they entered business with Gripen aircraft producer, following which, the Swedish partner launched the company’s career abroad. The head of the family business is still active at his age of 80 and hopes to be able to supply their products for the Alstom-trains as well.
This small size, family-owned Hungarian enterprise was built from the ruins of a falling apart socialist state-owned company, which entered the market with their own invention in the majority of the European countries. They managed to install fibre-reinforced composite in the chimneys as liner, whereas only steel, aluminium, ceramic or concrete would be used for the purpose, creating a chimney liner with better resistance to acids precipitating from the smoke. Kompozitor Kft. as producer of plastic materials with unique features has supplied products to the Parliament, the small-gauge underground trains, for the doors of the Budapest Gresham-palace and other renowned hotels. Although, it did not end in business, they also raised the interest of the Swedish aircraft manufacturer, Gripen as well. Later on however, this very contact helped starting the company’s expansion abroad. During the years, Kompozitor gradually reached 700-800 million HUF revenue but the drop back off the building industry made the company’s profit drop to the half, 150 million HUF and the European expansion could only balance only a part of the profit missing. The company selected not to pay dividends during the years but to use the profit for financing the investment of the new production facility and further developments instead.
Building upon the ruins
However, long years passed before entering the foreign markets. Kompozitor Kft. was established in 1991 by the staff of the department of fibre-reinforced composite materials of the national Plastic Research Institute running with 600 employees up to the political change in Hungary. Upon the collapse of the big national company, the employees of the department found themselves out on the street but decided to establish a company to be named after the type of composite they dealt with. The composite of high, 1,500 C degrees heat temperature-resistance composite had been created back in the research institute, therefore, the core idea was just given at the beginning of the company.
At the early stage, the company had two investor owners– through Eridanus Kft.-, who were offered to the attention of the engineers of the company by the government. “We did not have the competence for capitalism” –the story of the early stages was told by Géza Kecskeméthy, who lead the department in the research institute and then became the technical manager and later on the owner and managing director of Kompozitor to date. As he says, the first two owners thought “they could sell the company in the West in no time”, which did not happen to be the case but Agrobank took over the company in 1993. The engineer in chief, who is now 80 years old already involved his daughter in the company, however, he remained the managing director and generally the manager of the daily routines of Kompozitor. His daughter, Lídia Kecskeméthy believes the company is his father’s life: he keeps working from morning to night even through the weekends and finds his activity in that at his old age too.
As Géza Kecskeméthy said “the company has been seeking new solution since the very beginning, which, to some extent sources from discourage”, since the company endeavour to produce such products, which the market would buy for their unique features and for which no strong sales background apparatus is needed. This is because Kompozitor remains an “engineering company”. “You will not find sales people with us, even economic matters are covered by an engineer” –head of the company states.
Idea from the neighbouring wall
The first big customer of the company was Ikarus between 1992 and 1993, by which the loose wooden-plated and fungi-effected floor of their buses were to be reinforced with composite sheets. By the fact that the company collapsed, the orders were missed meaning 40 thousand square meters of sheets to supply per year. However, the fall could be avoided by such a product, the idea for which was provided off the wall on the site opposite to the company’s headquarters at that time. On the fire-wall, the external tracks of the wear of chimneys were to be seen, and then when the mechanics took the rotten aluminium tubes off the chimneys they realised they could produce composite liner tubes, which could be even more resistant than the currently known materials used for lining.
It took two and a half years to implement the idea but the serial production only began in 2000. The product was patent registered under the name FuranFlex® in 1994, and then, it was requested to be licensed in 1995-1996, so that it can be installed in chimneys. The subject licence was issued by the ÉMI (its current name was Building and Construction Control Authority). Géza Kecskeméthy believes this had been the first instance all over the world with using not-traditional material for chimney lining meaning, the application was pioneering. “The fact that it obtained authority licence was the company’s merit proving their courage in place.” – appreciated the company after 15 years time spent. Upon obtaining the authority licence the results only came slowly and between 1996 and 1998 “the company struggled”, since the first domestic installations started only in 1998, while mass production for export followed to be launched only two years later.
“I was shivering with the 100 million”
Meanwhile, the owners of the company kept changing. The company was acquired from the first owners in 1993 by Agrobank, which was further replaced by Magyar Építő Rt. in 1995. The latter one built up a large group in the beginning, in which they tried to integrate their own building industrial branches but, according to Géza Kecskeméthy’s opinion, they had realised I would be more worth purchasing the subject products instead of running various small-size companies. Therefore, they started to liquidate the small firms, and, as a consequence, Magyar Építő offered Komozitor to the company’s management to buy. “I was shivering with the 100 million” – said Géza Kecskeméthy, expecting that as the possible purchase price and then he finally said what he offer was about: “They said, I could buy the company for 25 million. I thought I would fell off the chair.
The money was gathered from friends and relatives in return of shares, and then Mr. Kecskeméthy purchased the entire enterprise in 1998. (Temporarily, several people were involved as owners of the company however, the majority of the company shares remained with the Kecskeméthy family.) Today, the main shareholder is Lídia Kecskeméthy with 53 percent of all the shares (the rest is her father’s), after having the shares with the friends and relatives purchased out. Although, Lídia Kecskeméthy did not work in engineering but in film making: she was production manager at the Hungarian Television, and then at Skyfilm commercials and feature films (Valami Amerika, Magyar Vándor, Lora) as producer in chief responsible for the staff and daily management. For the past two years she has been working as a freelanced producer and meanwhile she has been giving support to her father at Kompozitor.
The foreign market opened up for the company after the appearance of Gripen. It was not directly thanks to the Swedish aircraft producer though. Gripen was in the picture as an investor at that time, when the Horn-Government called for a tender of fighter-aircrafts, for which also Gripen applied. The Swedish partner undertook to bring investments to Hungary in case of a winning tender, in the framework of which Gripen would have also invested in Kompozitor following their current demand for heat-resistant composite products becoming due.
“How exactly the Swedish came across us will remain a secret forever; what happened was they simple showed up. Their wish was to develop high-strength, heat-resistant elements for their aircrafts together” – said Lídia Kecskeméthy. “We seemed almost ridiculously small as a company” – added company manager, Géza Kecskeméthy. We carried negotiations with the Swedish, still the business failed. After the government changed in 1998, the new government called a tender with new conditions: instead of purchasing, the Hungarian State leased the fighters and Gripen said farewell to Kompozitor. However, the contact did not shade without advantages as it brought us the opportunity to enter the foreign markets.
In fact, the delegation of Gripen recommended Kompizitor for Mr. Thomas Stenquist, manager of a Swedish company supplying chimney solution providers. The businessman, with whom we have maintained our contact to date, provided funds for the development and in Scandinavia (Sweden, Norway and Finland) introduced the chimney liner technology to the market. The foreign appearance weighted the product of the company.
“Spaceships are not standardized either, still they landed on the Moon ”
Besides the Swedish link, the rest of foreign markets started to be built from 1998. In 1998-1999, at an international industrial fair in Germany, the subject chimney lining technology turned out to be a completely new, not to be found anywhere else in the world. “We thought we would march in Germany with glory but the fact is, we have not sold a single piece there to date.” – said Géza Kecskeméthy, that is to say, we have not managed to obtain the licence in thirteen year. He believes the reason why they could not enter that European significant volume-market so far, because the German licensing procedure protects their domestic market. According to the company manager’s opinion, this means that the licence is being delayed on purpose in the hope that some German company will also be able to produce the technology in the meantime.
Kompozitor manager thinks the German qualification body would have expected them to standardise the technology. However, the subject product cannot be standardised due to the different features of each individual chimney concerned. “Spaceship is not standardised either, still it landed on the Moon” – the manager claims. The final resolution may be provided by the European Union stating that a licence (European Technical Approval) should be issued for a product that cannot be standardised, which will also have to be accepted by the German authority.
The largest foreign market of the company is Italy, where they found a smart entrepreneur, who organised over sixty chimney installer subcontractor for the company who are all entitled under licence to install the product officially that is they have all obtained Kompozitor’s approval for their installation. Today, the majority of the incomes come from abroad; Géza Kecskeméthy says it has been so for two years since due to the crisis in the building industry, sales dropped by 60 percent in the Hungarian market: from 2009 to 2010, the domestic sales revenue dropped from 359.7 million HUF to 253.2 million HUF. There was some short stop in the foreign market too however, they could manage sustaining a still inclining tendency: sales revenue increased from 436.6 million HUF to 519.3 million HUF in one year. The profit, before the crisis, in 2007, was 291.7 million HUF, which, by 2010, dropped to 152.1 million HUF. The company managed financing the manufacturing facility built in 2008 and the running developments by turning the profit back while no dividends were paid during the years. The company’s short term objective is to obtain the German market, which may be followed by the USA and Canada. The company manager thinks the firm is not likely to be able to deal with Chine as of today that is to purchase materials from there, however, no sales are going on in that area.
Géza Kecskeméthy admitted that the company’ weak point is sales. The reason for that is partly that the company has been mainly dealing with developments, while some serious improvements of sales have just begun currently. As he says, such professional person is still missing who would take care of getting to the market and look after the marketing tasks. A professional sales person is badly needed still because the company projects to be progressing in the field of the industrial chimney market, for which they showed up with another product since the basic technology cannot be applied over a certain dimension. At the chimney of the hazardous waste burning plant, the BÉM Borsodi Érc (ore) and the Nyersanyag Feldolgozó Mű (raw materials processing plant) the technology available up to 80 m high chimneys was applied. As the company manager explains, a significant part of industrial chimneys began to be worn out in the past few years since decades before they had switched from the fuel of wood to burning gas and other fuels, which however causes various acidic materials to condensate on the chimney walls. The high hardness composite resists to those, moreover they can be designed in almost all dimensions concerned.
As Kompozitor does not undertake construction operations, they only carry out production to the dimensions specified by the chimney builders. “I have never put my hands in a chimney in my life” – says Géza Kecskeméthy. Any installer company can get any of our products once they have obtained the Kompozitor Certificate, which is due upon completion of a specific practical training on a trail chimney. The company’s largest turn over volume contractor partner in the Hungarian market is Diametrus Kft., which, according to its manager, has been installing FuranFlex®-tubes in chimneys since 2004. Mr. András Somogyvári says, based on his experiences that about 60 percent of the customers select the product as they have already known it. As he says, FuranFlex® had to compete with the traditional technology earlier (steel, aluminium) but by the past few years FuranFlex® became definitely the most wanted solution at his company. The National Association of Chimney Repairmen estimates the number of chimneys having been equipped with FuranFlex® in Hungary during the past decade to be 100-150 thousand, whereas, the total number of chimney is approximately five million.
The product to say is possible to be installed in any shape of chimneys however the price of such flexibility shall be the unique construction process. András Somogyvári believes it would definitely boost the turnover is the green bank financing building renovation works was in place, since it could provide funds for the replacement of a good many “deathtrap” gas appliances. Kompozitor could also participate in such complex reconstructions with their product. The soft chimney liner folded flat is drawn into the chimney, and then it is inflated with the help of a steam generating unit. The produce the steam generator unit themselves and, the machinery of the new production facility in Vecsés, that was built from 800 million HUF in 2008, had also been designed by their own engineers.
Géza Kecskeméthy says the technology has been attempted to be copied however with not much success so far. The high technical level is ensured by the 25 years of guaranty provided. The insurance company Generáli found potential in the reliability of the service and now provides compensation for loss sourcing from any potential material defect in Europe as far as to the Ural Mountain (in Novosibirsk, two thousand metres have been installed but this is out of the range the guaranty covers. As the manager says, installers report maximum 2-3 issues per year, however, around the two million meters of lining tube there has not been any defect detected so far.
Composites outside the chimney
The majority of the company’ income (85-90 percent) is taken by the chimney liner product, which has been applied at the chimney renovation works of the Parliament too. However, there are also hard composite products developed for other sorts of applications available. Sheets have been supplied for the wooden doors of hotels (e.g. Gresham, Hotel Intercontinental), which provide the doors such a feature that they can resist to flames in case of fire. Gyártottak “vandal-proof” sheets for the floors and doors of the small-gauge underground trains have also been produced. A composite “honeycomb” sheet was also developed, which, thanks to their light weight, high strength and fire-resistance, can be applied at the construction of aircrafts, ships and railway assemblies. Negotiations are carried with the French company Alstrom known for the procurement of Hungarian metro carriages for they have the intention to install honeycomb panels in their trains.
The company consisting of 10 engineers and 25-26 shop floor workers has set up a special merit system in order to motivate innovation. If any of the employees has an innovation idea, which turns out to be applicable for integration into the products, the company provides him/her share of the profit. Therefore, there are employees who receive some extra hundreds of thousands HUF on top of the wage every year.
Source: http://www.uzletresz.hu/ – JANKOVICS SOMA