Wolf looks to China, U.S.

TALLINN - Wolf Group, Estonia’s largest maker of building materials, wants to sell its insulation foams and sealants in China and the U.S. for the first time to reduce dependence on neighboring Russia, where it is the market leader, reports Bloomberg. The Tallinn-based company, which exports brands such as Krimelte and Penosil to more than 30 countries, is “actively working” to enter the Chinese market where it sees opportunities in higher-end products, Chairman Jaan Puusaag said in an interview.

“It is a matter of ‘when,’ not ‘if’ we enter the Chinese market,” Puusaag said. “Some markets have higher entry barriers. We still don’t have all the necessary certificates for U.S. entry after two years of work.”
Construction foam is among the biggest exports in Estonia, where Germany’s Henkel, the owner of the Makroflex brand, also has a plant. Estonia was the third-biggest global producer of polyurethane insulation foams in 2007 with 45 million bottles produced, behind China and the U.S., which produced 60 million bottles and 50 million bottles, respectively, Puusaag said. China’s output has probably grown since then, “but likely not multiplied.”

Wolf Group aims to grow by 50 percent in the next three years after returning to annual sales of “about” 1 billion kroons (64.1 million euros) this year, the level it first achieved in 2008.
“Two years ago we projected that we will recover to previous levels of revenue and profits in two years and that we will grow 50 percent in five years from then,” Puusaag said. “We were able to foresee there will be a slump, and what will happen after that, and the forecast has held up rather well.”

Russian sales make up about 70 percent of the group’s total, Puusaag said. The company has a market share of about 23-25 percent in Russia, including private label products, he said. The neighboring country’s building market was able to weather the global credit crisis “relatively quickly,” in part due to rising oil prices and limited use of credit in construction.
“Of course we are trying to reduce dependency on Russia through global expansion but there is no getting away from the fact that Russia is a huge market,” Puusaag said. “You can feed a wolf as much as you want, but it won’t become a bear.”
Wolf is among the five biggest producers of foams and sealants in Europe, with a market share of about 10 percent, he said.

The global economic crisis hasn’t had a “noticeable” effect on the construction sector in the Nordic countries due to government support measures, while the building industry is starting to stabilize in the Baltic and Balkan countries where no such measures were used, Puusaag said. The U.K. has coped with the crisis “very well,” while demand in Germany remains at “modest levels not much different from before the crisis,” he added.
Puusaag said he wouldn’t rule out listing the company, although there is no need to sell shares to the public “at present.”