TIM’s President on the economic downturn: ‘So far we have come out of each one stronger. The same will happen this time’
– Our opportunity lies in the continued expansion of our high-margin product range for professionals. I expect that in more challenging times, our competitors will narrow down their offer and we will become the first choice platform for existing and new customers – says Krzysztof Folta, President and main shareholder of TIM S.A.
The turnover announced in the strategy of TIM at the level of 3 billion PLN per year by 2026 is quite an ambitious plan.
– Ambitious, but realistic. We have taken into account the aspect related to the increase in the value of the market of our business and the increase of TIM’s share in it. In addition to turnover, EBITDA of over PLN 250 million is equally important. It is possible.
Even despite the impending downturn in the economy?
– The impending downturn could have been expected as early as last year. The war in Ukraine only accelerated the inevitable process.
An increase in the prices of construction materials by several tens of percent per year, as well as high inflation for other products, will leave companies with a high demand for capital. Meanwhile, interest rates are rising, which will automatically reduce the creditworthiness of companies. Also, the cost of the financing will be higher.
I have the impression that the current discussion on mortgage loans is ignoring the far more important, from the point of view of the economy, loans for companies. It can be expected that companies will suspend projects and participation in public tenders. The question that usually arises in such situations is how to navigate through this market turbulence.
I expect you to say that this is an opportunity for TIM.
– Of course. This will not be the first economic downturn in TIM’s history, and so far we have come out of each one stronger. The same will happen this time. We are able to find the way for effective growth during a crisis. The only strategy I have for such moments is to adapt quickly to the situation. We always keep up.
So where do you see the opportunity?
– In increasing our market share. I estimate that currently TIM has about 12 percent of the market of electrotechnical materials distribution in Poland. This gives us the first place. Thanks to constant development in the e-commerce channel, nominally our revenues are growing all the time and we are gaining new customers.
Our opportunity lies in the continued expansion of our high-margin product range for professionals. I expect that in more challenging times, our competitors will narrow down their offer and we will become the first choice platform for existing and new customers.
However, in your strategy you are focusing exclusively on the electrical engineering sector. Will TIM’s offer no longer include products from other segments?
– Indeed, there was a period when on our online platform TIM.pl you could find products from industries unrelated to electrical engineering. We can say that now we are returning to our roots, but at the same time as a very strong entity in the e-commerce segment. We want to distinguish ourselves through professionalisation and a rich offer in the broadly defined electrotechnical sector.
What does this mean?
– Professionals, such as engineers, fitters and contractors will find everything they need here, with delivery within 24 hours. The range will be growing all the time – the plan for this year is to have 75,000 products on offer, and by 2026 at the latest – 100,000.
During the presentation of the strategy, you said that it is not difficult to have such a rich assortment, but it is difficult to know what it should consist of.
– We obtain this knowledge from suppliers, who point to the most promising products. We also react on an ongoing basis to enquiries and extend the assortment with goods complementary to those which sell best.
Certainly, we will also expand our offer with complex products related to, for example, industrial automation.
In March TIM generated turnover of over PLN 175 million. This is a record, which in a period of slower economic growth will probably be difficult to repeat?
– This surge was due to a simple reason: right after the outbreak of war in Ukraine, customers rushed to stock up. The demand was particularly high for cables and wires, the price of which, due to the rise in raw material prices, is also going up sharply.
This level of turnover meant that we set the bar very high for ourselves. A similar or even higher result can be repeated in the near future. Especially as we are seeing a clear influx of new customers. This means that we are indeed becoming the platform of first choice for more and more people.
Will TIM grow faster than the e-commerce market in Europe?
– There is a good chance to achieve this. The space for the development of e-commerce in Poland is still large, and we are constantly investing in development and new technologies. We are implementing, for example, the TIM 2.0 project, which aims to create a new purchasing platform. In parallel, we are working on other IT projects to continually improve the quality of customer service.
We are prepared to serve the growing number of young people who are entering the labour market, for whom the internet is a natural environment for working and shopping. Demography is clearly on our side.
Speaking of handling the growing number of orders, did you have a problem with the exodus of Ukrainian workers after the outbreak of the war in Ukraine?
– Indeed, Ukrainians constitute a significant part of the team of 3LP company from the TIM Group, which manages, for example, the logistics centre in Siechnice from which we send orders to our customers. However, we have not had to face the problem of outflow of workers – a significant part of them are women. We also have whole families working for us, with whom we cooperate on a long-term basis. Many people, after being employed by an employment agency, move to us as full-time employees.
We try to create the best possible working conditions for everyone, and additionally we are involved in helping refugees from Ukraine.
On the scale of the entire TIM Group, I have no worries about experiencing any challenges with staffing. We have adapted to the new realities of the labour market, including giving office workers the opportunity to work from home even 3 days a week. For many this is a huge additional value.
Coming back to the growing number of orders, 3LP’s modern infrastructure makes it easy to handle them. I am mainly referring to the automation installed in the facilities managed by the company. It is the absolute top not only in Poland, but also in the entire Central Europe.
The IPO of 3LP has been suspended.
– Temporarily suspended. The market situation is not favourable. But we are not giving up on the idea. According to the regulations, we have 12 months from the publication of the prospectus to introduce the IPO, thus until spring next year.
After the holidays, we will analyse the situation again and decide what to do next. I am hoping that market conditions for the issue of shares will be better.
Does the lack of an IPO mean the suspension of investments in 3LP, which were to be financed from the funds raised?
– No. The plan is to develop a logistics centre in Siechnice. This is a cost of about PLN 60 million, which we will finance with our own funds and a loan. The share issue was not a necessary element of its implementation.
3LP has very good development prospects. Poland is becoming a logistic centre for the European e-commerce market. It is not a coincidence that global giants locate their warehouses in Poland, and provide services to customers in other countries.
3LP will also follow this path. Next year we are planning to open a logistics centre in Słubice, which will be focused on serving customers from the German market. I am sure that this investment will open up many new opportunities.