Spotlight: TeraPlast: One step closer to reaping the rewards

The largest polymer processor in the eastern part of the EU and one of the main providers of comprehensive installation and construction solutions in Romania...

TeraPlast is the leader producer of the PVC pipes market (43% market share) and is one of top three producers of PEHD pipes in Romania. On the recycling business stands as the biggest recycler of rigid PVC in Romania and one of the top five recyclers in Europe due to the annual processing capacity of 31k tons. TeraPlast is also the market leader in the PVC compounds market in Romania (40% market share).

... is expecting to benefit from the favorable outlook on the infrastructure projects financed through EU and national funds.

In 2024, Romania is expected to continue to benefit from the National Recovery and Resilience Plan (i.e. NRRP) worth EUR 1.88 bn. Moreover, at the national level, there will be available funds of EUR 6 bn through the Anghel Saligny program and EUR 3 bn through the POIM program.

... will extend its geographical footprint to Western Europe and will take advantage from the latest M&A transaction.

TeraPlast group's competitiveness in export markets will be bolstered by the product mix and synergies generated across its portfolio, which are a result of the acquisition of Freiler's group. This acquisition will also help to reduce the group's reliance on a single market (Romania) and will enable it to expand its exports to Western European markets, which may have previously had technical specification barriers, and also increases logistic efficiency. At the same time, TeraPlast will increase the utilisation of newly established production capacities.

... is forecasting an upside of 33% yoy on volumes sold, reaching 100k tons in 2024.

Teraplast expects a double-digit growth on the volumes sold which should reach 80k tons (+16 yoy) based on the group's capacities at end of 2023. In addition, the M&A contribution is expected to be 20k tons.

... will benefit from the stretch film factory which became operational at end 2023.

The company has launched a stretch film factory with an annual capacity of over 14k tons, operating under the brand name "Opal." The company has reported that the factory has achieved optimal volume loading, and expects to sell 5k tons of products by 2024, resulting in a growth of 80% (i.e. RON 37 mn) to the top line of the flexible packaging segment. Teraplast is confident that the factory will reach its full capacity in the near future, as Romania is a net importer in the stretch film market.

TeraPlast at glance

TeraPlast’s history has started 128 years ago when the Saxon craftsman Walter Schuster has established a workshop for processing ceramic tiles in the city of Bistrita. In November 1990, the Construction Materials Plant of Bistrita was divided into two companies, and TeraPlast was established as one of them, after it took over the terracotta and plastics sections. In 1992, TeraPlast became a joint-stock company, and three years later, it completed the full privatization of its share capital.

TeraPlast's operations are supported by four business segments:
i) installation & recycling segment (represented 75% of 2023 top line) provides a wide range of installation systems and is the market leader of external sewers;
ii) PVC compounds and recycling segment (accounted for 11% of 2023 top line) supplies HFFR compounds, plasticised and rigid compounds and is the leader on the Romanian compounds market and the main supplier of PVC compounds for the cable industry in Romania;
iii) joinery profiles segment includes mainly the production and trade of windows and doors made from PVC and aluminum;
iv) flexible packaging segment is producing biodegradable and polyethylene products (i.e. foils, films, bags, sacks).

With over 34 years of experience, TeraPlast operates through by 8 factories located in Romania (Bistrita-Nasaud county) which are supported by roughly 80 production lines with state-of-art equipment.

TeraPlast has become the largest polymer processor in the eastern part of the EU. The Group's total operational area rises to 346k sqm, 30% designed for indoor production and storage and 70% for outdoor storage platforms.

The Group is boasting a workforce of around 1k employees, and it serves 3.2k customers annually through 7 logistics centers, out of which 6 are located in Romania and one is located in Hungary.

TeraPlast has been listed on the Bucharest Stock Exchange since July 2008, after a successful IPO through which the company's shareholders sold 20% of the shares for EUR 14 mn.

At the end of 2023, the group's operational structure included: TeraPlast SA (the parent company) and four subsidiaries (i.e. TeraPlast Recycling, TeraBio Pack, TeraGlass Bistrita and Somplast).

Over the years, TeraPlast has experienced growth through both organic means and strategic mergers and acquisitions. Between 2021-2023, Teraplast has spent in total RON 326 mn on capex to increase its production capacities or to diversify the product portfolio. For 2024, the management has indicated a capex of RON 54 mn, which will facilitate organic growth within the group.

Teraplast’s 2023 consolidated turnover reached RON 672 mn (down by 5% yoy) due the decline with 40% yoy on the compounds segment. At the same time group's EBITDA stood at RON 51 mn (slightly down by 3% yoy), while net profit reached at RON 1.1 mn (down by 84% yoy). In terms of margins, EBITDA margins stood at 7.6% (up by 20 bps yoy), while net profit margin reach 0.2% (dropped by 200 bps yoy). In 2023, exports represented 16% of total turnover amounting to RON 106 mn. As a result, the Group’s products has reached in 22 European markets.

In addition to the group's structure presented above, TeraPlast also holds stakes in:
• TeraPlast Magyarország KFT- owned 100% by TeraPlast and is the subsidiary from Hungary in charge with the distribution;
• Somplast SA - owned 70.75% by TeraPlast and holds the production halls that are leased to TeraBioPack and TeraPlast Recycling;
• TeraGreen Compound - 100% owned by TeraPlast and is an inactive company.

In 2024, the group's structure will also include the last two M&A transactions which were already closed: i) Palplast from the Republic of Moldova (manufacturer of HDPE pipes) and ii) Wolfgang Freiler Group from Austria (manufacturer of injected plastic parts, high-density polyethylene pipes, pipes for electric cable and optical fiber protection).

Shareholding structure

The company's ownership is mainly divided between: Mr. Dorel Goia (46.8% stake), NN Pension Fund (12.0% stake), Allianz Pension Fund (6.2% stake) and LCS IMOBILIAR (3.6%) which together represents around 68.7% of the total capital.

Recent developments & expectations

Following the integration of the newly acquired businesses (i.e. Palplast Moldova and Freiler Group from Austria) which is estimated to be completed in the first half of 2024, the Group's capacity will increase at 195k tons annually (up by 19k tons), while the total operational area will reach 500k sqm (up by 154k sqm).

Furthermore, TeraPlast estimates that both M&A transactions will contribute with 15% to the growth of installations' turnover (i.e. RON 96 mn) and EBITDA (i.e. RON 10 mn) in 2024, following the consolidation process, which is estimated to be completed in the first half of 2024.

For 2024, TeraPlast's management provided a slight conservative guidance which envisages a prudent organic growth. The consolidated turnover is forecasted to have an upside of 29% yoy amounting to RON 865 mn, mostly due to the installation segment which is estimated to grow by 27.5% yoy and reach RON 639 mn.

The company expects an upside of 39% yoy on the consolidated EBITDA, amounting to around RON 72 mn due to the organic growth of the business and M&A contribution. The net profit is estimated to reach RON 11 mn. Regarding profitability margins, TeraPlast expects improvements that would lead to EBITDA margin at 8.3% and net profit margin at 1.2%.

TeraPlast is carring out the production activity in three locations from Romania (marked with yellow on the map below ), located in Bistrita-Nasaud county: i) Saratel village (where is also the company's HQ), ii) Bistrita city and iii) Nasaud City.

In addition to the solid network of partners, TeraPlast's distribution activity is also supported by six own distribution centers which are distributed around Romania (marked with blue on the map).

The company holds also a distribution center in Hungary (marked with blue on the map), which was established in 2022 and became operational in 2023.

The total area on which the group operates rises to 346k sqm, divided between: 30% indoor production and storage area and 70% outdoor storage platforms.

The group has an annual processing capacity of 176k tons of polymers and operates through 10 factories, consisting of roughly 80 production lines equipped with state-of-the-art equipment. The group's subsidiaries, based on the factories they operate, are:

• TeraPlast operates four factories located in Saratel village: the PVC factory, the polypropylene factory, the polyethylene products factory and the factory of polyethylene systems for water and gas;
• TeraPlast Recycling operates three factories: the stretch film factory located in Saratel village and two factories of recycled PVC which are located in Nasaud city;
• TeraGlass operates one factory that produces PVC windows and doors which is located in Bistrita city;
• TeraBio Pack operates two factories: one that produces polyethylene packaging which is located in Nasaud city and one that produces biodegradable packaging which is located in Saratel village.
  

The business model is divided into four business lines, as follows:

1. Installations & recycling — this business line includes various systems such as: internal and external sewer systems, water and natural gas transport systems, rainwater management systems, cable protection systems, and underfloor heating systems.

TeraPlast holds the top positions in all categories, but in the external sewer system category the company is the market leader and ranks among the top three players in other segments of the Romanian installation market.

TeraPlast's installations portfolio is focused on serving the infrastructure market, while also catering to residential and non-residential construction markets.

Over the past three years, TeraPlast made significant investments in expanding the production capacities and diversifying its product portfolio. As a result, starting from 2022, the company has added two new product ranges to the installations business line:

i) TeraDuct which provides microtubes for the protection of optical fiber cables;

ii) NeoTer which is a complete underfloor heating system. The introduction of these new systems, offers TeraPlast the opportunity to address new markets that offer a great potential for growth.

Currently, the installations' portfolio consists of three types of PVC pipes with recycled material under the Gri(n) Pipe brand, as follows:

• PVC pipes with a multi-layer structured wall, which feature an expanded core made of 100% micronized recycled PVC, and outer walls that are made of virgin raw material (with 50% recycled content).
• PVC pipes with a multi-layer structured wall, which have a compact core made of 100% recycled PVC, and outer walls that are made of virgin raw material (with 55% recycled content).
• PVC pipes with a multi-layer structured wall and expanded core, which are made of 100% micronized recycled PVC in both the core and the compact layers.

TeraPlast's producs are very durable over time, for instance: i) the NeoTer underfloor heating system is expected to last for about 50 years, while ii) PVC, PP or PE pipe systems, which designed for internal and external sewers, drainage, and transportation and distribution of water and gas, have an estimated service life of at least 50 years. Additionally, the water pressure pipes made of PE that have an added layer of PP are expected to last for at least 100 years.

2. Compounds (incl. recycled rigid PVC) business line

i) Compounds division — comprises plasticised and rigid compounds that find applications in the extrusion and injection industry. The application fields, depending on the type of compounds are:

• granules for electrical purposes (flexible cord sheath, flexible cord plug injection, general purpose fireproof and UV protection electrical cable protection sheath, sound cable insulation, car cable insulation);
• coloured or clear plasticised granules used for footwear soles;
• clear plasticised granules used for the production of hoses.

Additionally, the product portfolio includes halogen-free, fire-resistant (HFFR) compounds, an innovative product that was recently developed and co-financed through the state aid scheme. The company also serves as the primary supplier of PVC compounds for the cable industry in Romania.

ii) Recycled rigid PVC — the finish product of this segment is derived from PVC pipes or profiles and can be in the form of regranulated PVC or micronized PVC with a size of 1k microns. The company's recycled PVC finds successful applications in the production of PVC profiles or sewer pipes.

3. Joinery profiles business — operates through TeraGlass Bistrita and its portfolio comprises two product families for the production and trade of windows and doors, as follows:

• PVC windows, doors, and accessories, which include: i) the TeraGlass window and door systems with four, six and seven chambers; ii) Salamander window and door systems with five and six chambers.
• Aluminum doors, windows, and structural walls, which are available with or without a thermal barrier based on the specific requirements and needs of the customer.

Over 70% of the yearly production is exported to countries like Germany, Hungary, Slovakia, and Austria. DIY stores (i.e. "do it yourself") located abroad serve as a significant distribution channel for TeraGlass products.

4. Flexible Packaging — is operated by TeraBio Pack subisidiary and is divided into two segments:
i) TeraBio is specialised in products made from biodegradable materials (i.e. foils, films, bags, and sacks) which are certified as OK Compost by TUV Austria.
ii) TeraPack is producing polyethylene foils and films for agricultural use (solarium foil), in the construction industry (film, protection foil) and as semifinished product in the packaging industry. This division includes the polyethylene packaging production capacities acquired from Somplast (September 2021) and Brikston Construction Solutions. TeraBio Pack started production of biodegradable flexible films and packaging at their new facility in TeraPlast Industrial Park in December 2021.
TeraBio Pack are aimed to distributors, retail chains, and industrial customers. Since its inception in December 2021, TeraBio Pack has emerged as one of the top five manufacturers in the market by the end of 2022.

Product portfolio - flexible packaging

Source: TeraPlast

Product portfolio - flexible packaging

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Source: TeraPlast

Teraplast's products are certified and tested internationally

The group's products are certified and tested by esteemed institutions, such as: IFT Rosenheim, SRAC, ICECON Romania, DIN CERTCO, and TUV Austria. In addition, the group is compliant with European standards and maintain an Integrated Management System for Quality, Environment, Health, and Occupational Safety, including ISO 9001, 14001, and 45001.

TeraPlast's R&D activity

TeraPlast's internal testing laboratory holds accreditation from RENAR (Romanian Accreditation Association). Furthermore, the company conducts annual research and development activities for the product portfolio. In 2022, the main projects in this area included underfloor heating pipes (PE-Xa), PVC compounds, and HFFR (halogen-free, fire retardant). In 2023, the company's primary focus was on continuing to develop compound recipes and enhancing the recipes for PVC pipes to increase their resistance. The company invest annually over RON 250k (including personnel expenses) for this area of activity.

The Group's product mix addresses to various sectors such as:
i) the construction market through installations and heat-insulating carpentry segments;
ii) the manufacturing industry with the compounds segment;
iii) the PVC processors market through the recycling of rigid PVC;
iv) the flexible packaging market through its portfolio of polyethylene foils and films, including biodegradable material.

The business portfolios operate on a B2B business model and cater to:
i) enterprise companies, distributors, and DIY stores in the installations and joinery profiles segments;
ii) PVC processors and manufacturers who use PVC as raw material in the segments of recycling rigid PVC and compounds;
iii) large retail chains, distributors, and industrial companies who require foils for packaging their goods in the flexible packaging segment.

Regarding market shares, the Group holds top position in most of the markets it addresses.

According to 2022 market data, TeraPlast is the leader producer of the PVC pipes market, with a market share of 43% in absolute values and 46% in terms of quantities sold. In 2022, the PVC pipes for external sewerage accounted 78% of the sales and 85% of the volumes sold. Between 2020-2022, the PVC pipes market had a CAGR of 31%, resulting in EUR 130 mn revenue in 2022, with 64k tons sold. The top three players in the market accounted for 85% of the total market in terms of sales and volumes sold.

According to 2022 market data, TeraPlast is one of top three producers of PEHD pipes, with a market share of 16% in absolute values and quantities sold. The top three players in the market accounted for over 70% of the total market in terms of sales and volumes sold. In 2022, the market was led by PEHD pipes for water, accounting for 64% of the sales and 66% of the volumes sold. Between 2020-2022, the PEHD pipes market had a CAGR of 18%, resulting in EUR 187 mn revenue in 2022, with 86k tons of pipes sold.

As per the management, TeraPlast Recycling, a subsidiary of the group, stands as the biggest recycler of rigid PVC in Romania and one of the top five recyclers in Europe due to the annual processing capacity of 31k tons.

According to the management, TeraPlast is the market leader in the PVC compounds market in Romania with a market share of around 40% (acc. to 2021 market reports).

On the joinery profiles market, TeraPlast operates within a fragmented market with over 1k producers. In the near future, the company aims to rank among the top ten producers of windows and doors in Romania.

As per the management, TeraBio Pack, a group's subsidiary, is ranked among the top five major producers in the flexible packaging market.

Strengths/Opportunities

• The company's business size (looking at the quantities delivered to the customers) together with the diversity of the product portfolio offered to customers are one of the main competitive advantages of TeraPlast;
• TeraPlast's modern manufacturing facilities, equipped with state-of-the-art technologies allow the company to preserve the quality of the products and to deliver the scheduled quantities with lower operating, maintenance and repair costs compared to other competitors;
• The geographical expansion may lead to lower logistics/transport costs and could increase the company's customer portfolio;
• The acquisition of Palplast from the Republic of Moldova serves as a gate to the Ukrainian market which will require to be rebuilt considering the impacts of the war;
• The acquisition of Freiler Group from Austria would enable the company to expand its presence in the Central and Western Europe and to sell also complementary products to Freiler's products portfolio;
• The major investments completed in the last two years aim to diversify the field of activity and the geographical footprint of the Group.

Weaknesses/Threats

• Potential geopolitical risks in the event of an escalation of the war in Ukraine, which could pose new challenges for global supply chains;
• Business challenges on: i) estimated vs. realised levels of water & sewage works financed from European and public funding; ii) raw material prices volatility; ii) construction sector' volatility.

1. Revenues

Revenues by business segment

From an operational perspective, TeraPlast’s revenues are divided into four business segments. The installations and recycling segment accounts for the lion’s share with 75% of 2023 net turnover, followed by the PVC compounds segment with 11%, while the joinery profile and flexible packaging segments each account for 7%.

Share of business segments in total turnover, RON mn, %

Source: TeraPlast

Share of business segments in total turnover, RON mn, %

X

Source: TeraPlast

Between 2021-2023, the company’s turnover registered a CAGR of 5% and reached RON 672 mn in 2023 mainly due to the growth of the installations and recycling segment, which in 2022 had a 20% yoy growth benefiting from the inflationary context. However, in 2023 the company managed to offset the slight decline of 5% yoy in total turnover brought by the deflation effects on lower raw materials prices (-21%) with the improved mix of sales (+15%).

Revenues by business segments, RON mn,%

Source: TeraPlast

Revenues by business segments, RON mn,%

X

Source: TeraPlast

1. Installations and recycling segment (the company's engine) had a positive turnover evolution between the 2021-2023 period, registering a CAGR of 11% and amounting to RON 501 mn in 2023. The growth was due to inflation, as the volumes remained stagnant in 2022 vs. 2021, resulting in margin pressure and a partial cost transfer to the market. The war in Ukraine disrupted the logistics chains in the region in 2022, when things took an exponential turn leading to a significant surge in prices, including the construction materials prices.
According to the management, this segment faced a downward trend in the quantities sold in the first half of 2023 and the rebound in volumes was possible in Q3 23 (for products like: PE pipes, fittings, rotoforms, Neoter and TeraDuct) and in Q4 23 (for the other products, such as: PVC pipes – on an upward trend, but not enough to reach the volumes of the 2022).

2. PVC compounds (incl. recycled) segment has faced an unusual market situation due to unforeseen disruptive factors which led to a negative top line CAGR of -28% between 2021-2023, with revenues amounting to RON 76 mn in 2023. Against the backdrop of rising in energy costs within the European Union (EU), there were significant variations in quotations between raw materials sourced within the EU (incl. Romania) and those from outside the EU. The management attributed the nearly 40% yoy decline in turnover in 2023 to reduced activity among customers in the granules segment, which lead to the contraction of the market.

3. Joinery profiles (windows and doors) segment had a positive turnover evolution between 2021-2023, posting a CAGR of 6% and amounting to RON 49 mn in 2023. This division witnessed a turnover growth of a 30% yoy in 2022 vs. 2021 due to an increase in sales volumes. In 2023, this business had a turnover decline of 14% yoy as the underlying trends have reversed, volumes falling significantly (-40% yoy), especially in the retail segment. As a result, TeraPlast decided to shift the focus away from retail, reducing its dependence on it. Instead, it will be concentrating on the local market and non-retail projects, which will contribute to 28% of the segment turnover.

4. Flexible packaging segment was added in 2021 to TeraPlast's business portfolio, when TeraBio Pack took over the polyethylene flexible packaging business from Somplast. This segment had a positive turnover evolution between 2021-2023 which was reflected in a CAGR of 66%, amounting to RON 46 mn in 2023. This growth was supported by higher yoy volumes of flexible packing (i.e. +77% yoy in 2022 vs. 2021). By the end of 2023, the company successfully launched the stretch film factory (with an annual capacity of over 14k tons), whose products are sold under the brand "Opal". The company has reported that the factory has achieved optimal volume loading, and expects to sell 5k tons of products by 2024, resulting in a growth of 80% (RON 37 mn) to the top line of the flexible packaging segment. Teraplast is confident that the factory will reach its full capacity in the near future, as Romania is a net importer in the stretch film market.

Revenues by distribution channels

In the past three years, TeraPlast has been able to steadily boost the proportion of its top three distribution channels in terms of overall turnover, which make up 75% of the company's operating revenues. Consequently, in 2023:
i) the infrastructure channel's contribution to total turnover reached 39% increasing from 36% in 2022 and 29% in 2021%;
ii) the distributors accounted for 25% in total turnover growing from 23% in 2022 and 20% in 2021;
iii) the export dealer's share in total turnover reached 11% in 2023 grew up from 9% in 2022 and 8% in 2021.

Revenues by distribution channels in 2023, %

Source: TeraPlast

Revenues by distribution channels in 2023, %

X

Source: TeraPlast

Revenues from exports

Teraplast's exports had a positive evolution between 2021-2023, recording a CAGR of 11%, leading to RON 108 mn in 2023. In the past years, the company also increased the regional presence of the group by expanding into Hungary and the Republic of Moldova. As a result, the revenues from exports accounted for 16% of 2023's total turnover and were available in 22 countries, including: Hungary, Germany, Bulgaria, the Czech Republic, and the Netherlands, among others.

TeraPlast group's competitiveness in export markets should benefit by the product mix and synergies generated across its portfolio, resulting from the acquisition of Freiler's group. This acquisition will also help to reduce the group's reliance on a single market (Romania) and will enable it to expand its exports to Western European markets.

Revenues from investment subsidies

Over the course of years, TeraPlast has benefited from significant amounts of subsidies in order to finance its investments. Between 2021-2023 the revenues from investment subsidies had a CAGR of 82% and reached RON 8 mn in 2023.
Company's recent investment plans include the development of renewable energy through NRRP (i.e. National Recovery and Resilience Plan). The company signed the financing agreement for a financial support of approx. RON 5.5 mn (almost a quarter of the total budgeted investment).

2. Operating expenses

The company's operating expenses recorded a CAGR of 8% yoy between 2021-2023, which is above the company's turnover growth of 5%. In 2022, all types of operating costs had double digit growth rates yoy driven mainly due to high inflation, while in 2023 costs posted a lower growth rate, reflecting the deflationary process.
The costs with significant weight in total opex which marked the highest growth rate between 2021-2023 were:

i) utilities expenses which had a 37% CAGR - starting from 2022, the company increased its production capacities for the installations and recycling segment by 50%, and in 2023, a new production unit was established for manufacturing biodegradable films, bags, and sacks. Moreover, in 2023, the company had to pay higher electricity prices and sold higher volumes of products across most business lines (excluding joinery profiles segment).

ii) D&A expenses which recorded a 37% CAGR - reflecting the company's intensive capex plan (i.e. RON 326 mn in the last three years).

iii) employee expenses had a 17% CAGR - was mainly because of the inflationary context which led to a general increase in wages. There was also an average increase of almost 20% yoy of the minimum gross wage between 2021-2023. In the last two years, the average number of employees was almost flat, amounting to 945 in 2023.

iv) other operating expenses registered a CAGR of 19% - driven by the rise of: third party costs (CAGR of 16%, amounting to RON 16 mn in 2023), repair costs (CAGR of 32%, totaling RON 6 mn in 2023) and advertising costs (CAGR of 45%, reaching RON 4 mn in 2023).

Opex by business segments, RON mn, %

Source: TeraPlast

Opex by business segments, RON mn, %

X

Source: TeraPlast

In terms of business lines, the company's operating expenses are mainly driven by the installations and recycling segment which accounted for 72% of the 2023 group's costs, followed by the PVC compounds (incl. recycled) segment with 11%, while the flexible packaging accounted for 9% and joinery profile for 7%.

3. Profitability

Between 2021-2023, the group's EBITDA CAGR was down by 17%, reaching RON 51.4 mn in 2023. The drop was driven by the volatility of raw material prices and a below-estimated level of water & sewage works financed from European and public funding in 2022. In 2023, the group's EBITDA had a slight contraction of 3% yoy. This was primarily because of a 53% yoy decline in the compounds segment following the curtailment of customer activity.

EBITDA decomposition by business segment, RON mn

Source: TeraPlast

EBITDA decomposition by business segment, RON mn

X

Source: TeraPlast

The installation and recycling segment has been primary source of the group's profitability with a high margin of 11% on average between 2021 and 2023. Despite the challenging business environment during the last two years, this segment was able to maintain its EBITDA at a flat level and also compensate for the decline recorded by the other segments.

The group's EBITDA margin eroded significantly and was 7.4% in 2022 vs. 12.1% in 2021, mostly due to the challenges faced by the joinery profiles segment and flexible packaging segments in 2022. These challenges included delays in indexing selling prices and high ramp-up and market penetration costs. Additionally, in 2022, the joinery profile segment faced significant challenges due to rapidly increasing raw material prices, particularly in PVC profiles and glass. TeraPlast struggled to pass on these increased costs to customers due to the significant bargaining power of Europe's large DIY chains.

In 2023, TeraPlast adapted to the the market challenges by strategically focusing on efficiency and expanding through investments and M&A. This led to a 7.6% EBITDA margin, which is 20 bps above the level of 2022. Consequently, the EBITDA margin per business segments reached:

• 10.5% for the installations segment (flat yoy, but down from 12.4% in 2021) as it benefited from the advance of engineering construction works from public funds, which were accelerating especially in the second part of the last year.
• 7.9% for PVC compounds segment (down from 10.1% in 2022 and 18.2% in 2021) as the segment experienced a turnover contraction of 40% yoy following the curtailment of customer activity.
• 0.9% for joinery profiles segment (up from 0.6% in 2022, but still below the level of 2.3% in 2021) as the segment experienced a decline in volumes of 40% yoy on the retail segment (sales were down by 14% yoy in 2023). As a result, the Group's strategy was revised and TeraPlast will intensify its focus on the local market for rehabilitation and new construction segments in order to reduce dependence on DIY stores. The share of non-retail projects in segment's turnover has reached 28% in 2023, offering higher added value and a material margin of 44% in 2023 vs. 39% in 2022. However, this improvement was not fully reflected in the EBITDA, which was only RON 0.4 mn, as the division faced a significant increase in processing costs. The average salary in the division rose by 46% yoy mainly due to the growth in the minimum wage in construction and related sectors.
• -16.2% for the flexible packaging segment (improved from -27.9% in 2022 and -21.9% in 2021). This is the only segment with a negative EBITDA. According to the management, this segment improved in 2023 and achieved optimal volume loading, indicating positive prospects for operational efficiency in 2024. The company is committed to shift focus towards increasing profitability, including reducing production in inefficient facilities.

EBITDA and net profit margin evolution, %

Source: TeraPlast

EBITDA and net profit margin evolution, %

X

Source: TeraPlast

4. Net profit & dividends

Net profit

The company's net profit (excl. the one-off profit of RON 189 mn in 2021) had a negative CAGR of 83% between 2021-2023 and reached RON 1 mn in 2023. This decline was caused by several factors, including: i) the increase in operating expenses exceeding revenue growth on the back of the inflationary context and intensive capex plan and ii) higher financing costs.

Additionally, TeraPlast's asset base increased due to significant investments, leading to the doubling of depreciation costs. TeraPlast's net profit was also affected by the significant increase in financing costs (+137% CAGR between 2021-2023, reaching RON 13 mn in 2023. As a result, the net profit margin was only 0.2% (down by 200 bps yoy).

In 2023, the net profit evolution by business segment was generated as follows: i) RON 17.3 mn (+27% yoy) from the installations segment; ii) RON 1.6 mn (-81% yoy) from compounds segment; iii) joinery profiles segment and flexible packaging segment had cumulative net losses of around RON 18 mn. The flexible segment has been also affected by the construction of stretch film factory that was commission by end of 2023.

Dividends

Looking back over the last three years, TeraPlast has distributed dividends totalling RON 259 mn, which were paid from the net profit generated in 2021, implying a pay out ratio of 112% (reflecting also the special dividend). In July 2021, Teraplast paid a special dividend of around RON 227 mn from Q1 2021 net profit, which included the profit (i.e. RON 189 mn) from the selling of TeraSteel Romania and Serbia and Wetterbest to the Kingspan group. The difference from the sales proceeds (i.e. RON 186 mn) was used by TeraPlast to finance its investments.
In 2022, the company distributed dividends amounting to nearly RON 33 mn from the profit earned in Q2-4 of 2021.

TeraPlast's Board of Directors and management team prioritise the company's investment needs and growth opportunities when it comes to the dividend policy. They consider factors such as the expansion of production capacities, the development of new products, or M&A activity. Dividend distribution is seen as a secondary priority after a thorough evaluation of the company's financial position and future prospects. The company does not specify a minimum payout ratio to shareholders, but TeraPlast may choose to capitalise undistributed earnings by increasing the share capital or distributing free shares.

5. Capex & Net Debt evolution

Between 2021-2023, TeraPlast has spent around RON 326 mn on capex , mostly on two business segments (i.e. installations and recycling and flexible packaging segments) in order to increase the production capacities and to be able to cover the customer's needs in terms of timing and requested quantities. As a result, TeraPlast's key investments were:

• In 2021, Teraplast has invested RON 67 mn in the establishment of a new production unit for the manufacture of garments made of biodegradable foils, sacks and bags. The investment was entirely put into operation in December 2021. The company received a state aid in amount of RON 28 mn, while the difference came mostly in form of bank loans.
• In 2022, the company allocated RON 42 mn to increase the production capacity for PVC pipes and fittings. TeraPlast extended the production capacity within the existing site for certain categories of products, namely fittings (PP and PVC), PE pipes and PVC pipes, by making investments in the construction of new buildings and purchase of equipment. The investment was entirely put into operation in November 2022. TeraPlast has received a state aid in amount of RON 19 mn.
• In 2022, TeraPlast invested RON 56 mn in a polyethylene installations plant, namely in a new production unit for the manufacture of plastic products. The new plant became fully operational already in December 2022. TeraPlast received a state aid in amount of RON 24 mn. Following both investments, the production capacities on the installation segment enhanced by 50%.
• In 2023, TeraPlast invested RON 84 mn to set up a new production facility with two production lines for polyethylene films designed for industrial use. The stretch film factory was fully up-and-running in December 2023 and has an annual capacity of over 14k tons.TeraPlast will receive a state aid in amount of RON 26.3 mn.
• The products will be sold under the Opal brand. Opal's B2B customers are from a variety of industries, with products amenable to the safe packaging of palletised goods for transport for manufacturers, distributors and logistics service providers. Starting with 2024, the Opal activity will be reflected in the financial result of the flexible packaging business line. Opal's products are available in both, the local market and the Group's existing export markets, and those that will be integrated following the completion of the M&A operations.
• Average annual maintenance capex was around RON 7-8 mn.

On top of the above investments, in 2023 TeraPlast has finalised the documentation for the development of renewable energy. This will enable construction of a new photovoltaic plant within the Industrial Park of Saratel and is estimated to become operational by the end of 2024. TeraPlast' estimated budget is around RON 23 mn, out of which a quarter will benefit from the non-refundable financing through NRRP (i.e. National Recovery and Resilience Plan). The design of the new photovoltaic plant includes installed power of approx. 4.56 MWp. This project is part of TeraPlast's sustainable development strategy, which also includes increased independent energy production from renewable sources.

Overall, the company's main investments have been focused on diversifying the company's field of activity, expanding the production capacities and its geographical footprint, increasing energy independence, and substituting virgin raw materials with recycled material.

In line with the cautionary guidance for 2024, the management has forecast a capex budget of RON 54 mn (i.e. aprox. EUR 10.8 mn), which will facilitate organic growth within the group. Main investments are planned on:
i) PVC production facilities for Freiler (i.e. RON 20.4 mn), Palplast (i.e. RON 7.4 mn) and TeraPlast (i.e. RON 8.1 mn);
ii) maintenance capex for TeraPlast (i.e. RON 7.7 mn)
iii) equipments for Teraplast (i.e. RON 4 mn), TeraPlast Recycling (i.e. 1.3 mn) and TeraGlass (i.e. RON 0.2 mn);
iv) building's repairs for Somplast (i.e RON 3.6 mn).

The company's intensive investment plans were reflected into the company's net debt increase from RON 139 mn in 2021 to RON 241 mn in 2023. As a result, Net debt/EBITDA in 2023 stood at 4.7x. Although, at first glance the level of the net debt/ EBITDA looks quite high, it is worthwile to mention that the company does not include the proceeds from investments subsidies (2023: RON 8 mn) when computing the EBITDA. In addition, TeraPlast's financing has a unique aspect that involves non-refundable cash receipts from the state aid. Over the years, TeraPlast has been able to settle significant amounts related to investment projects (i.e. RON 30 mn in 2022, RON 24 mn in 2023).

For 2024, TeraPlast's management provided a slightly conservative guidance which envisages a prudent organic growth. Considering the macroeconomic outlook, the company expects contractions at variable levels in most of the sectors, while the infrastructure projects fueled by the public funds should have a positive evolution and drive the company’s growth.

For 2024, TeraPlast's consolidated turnover is forecasted to have an upside of 29% yoy amounting to RON 865 mn, mainly driven by:

i) the installation segment which is estimated to grow by 27.5% yoy and reach around RON 639 mn. The acquired companies will generate 15% (i.e. RON 96 mn) of this growth after the consolidation process.

ii) the compounds segment which is expected to rise by 22% yoy amounting to around RON 93 mn.

iii) the flexible packaging segment is estimated to rise by 80% yoy amounting to RON 84 mn as the Opal - stretch film brand - will become operational. Opal's products are targeted towards the local market as well as the Group's current export markets, and any future ones resulting from the completion of M&A transactions.
On the local market, there is a trade deficit in the stretch film market, which might provide TeraPlast and other local producers a competitive edge in terms of promptness and profitability.

In 2024, the company expects a flattish evolution yoy on the joinery profile segment, as the company will carry on with their strategy initiated in 2023 of shifting their focus to the non-retail sector. The recently hired team, possessing sales experience in the construction and rehabilitation market which will provide an added boost to this initiative.

Turnover guidance per business segment, RON mn, %

Source: TeraPlast

Turnover guidance per business segment, RON mn, %

X

Source: TeraPlast

Regarding the total volumes expected in 2024, TeraPlast estimates an increase of 33% yoy amounting to 100k tons. The contribution of the acquired subsidiaries is expected to be 20k tons, while the difference of 80k tons (+16% yoy vs. 2023) will be generated by the current group structure.

EBITDA guidance per business segment, RON mn, %

Source: TeraPlast

EBITDA guidance per business segment, RON mn, %

X

Source: TeraPlast

At the group level, TeraPlast expects an EBITDA increase of 39% yoy amounting to around RON 72 mn on the back of organic growth of the business and recent M&A activity. The consolidation of the last two acquisitions is expected to contribute 15% to the EBITDA's overall growth in the installation and recycling segment.

In 2024, TeraPlast's EBITDA margin is expected to improve to 8.3% (up by 70 bps yoy), while EBITDA margin per business line is believed to reach:
i) 10.6% (up by 10 bps yoy) for the installation segment;
ii) 7.1% (down by 80 bps yoy) for the compounds segment;
iii) 6.6% (up by 570 bps yoy) for the joinery profile segment;
iv) -7.3% (up by 590 bps yoy) for the flexible packaging segment.

EBITDA and net profit guidance, %, RON mn

Source: TeraPlast

EBITDA and net profit guidance, %, RON mn

X

Source: TeraPlast

Net profit was indicated to reach RON 10.6 mn, 10 times above the level of 2023, while net profit margin should be up by some 100 bps yoy to1.2%.

Looking at the company's indebtedness level, Net Debt/EBITDA guidance for 2024 was indicated at 4.8x, which is slightly higher than the level of 4.7x for 2023. This guidance also takes into account the financing of the Wolfgang Freiler Group acquisition, for which TeraPlast borrowed EUR 13 mn from Banca Transilvania.

According to the last conference call hold by TeraPlast's management, the last two acquisitions (Palplast from the Republic of Moldova and Freiler Group from Austria) will be consolidated within the installations and recycling business segment in the first half of 2024.

1. The acquisition of a 70% stake in Palplast for EUR 1.8 mn was announced in December 2023 and finalized in January 2024. The transaction price will be used as follows: EUR 1 mn will be contributed by TeraPlast to Palplast's capital, while the difference of price will be paid to the existing shareholder. Following the transaction, Fribourg Capital (the current shareholder) will hold 49% stake in Palplast.

Palplast is specialised in the production of HDPE pipes and plans to use the funds to diversify its production capacity (currently is 3.8k tons per year) and to expand the logistics platform (currently totals 6.7k sqm and has a potential for further expansion of around 6k sqm).
In 2024, TeraPlast plans to invest EUR 1 mn to diversify Palplast's product porfolio. Taking into account Palplast's proximity (59 km to Romanian border and 130 km to Ukrainian border), TeraPlast plans to use it as a distribution platform for the products manufactured in Romania.

The acquistion of Freiler Group from Austria for EUR 16.5 mn was announced in January 2024 and finalised in March 2024.Freiler Group's turnover was EUR 31 mn in 2022, while EBITDA stood at EUR 4 mn, implying an EBITDA margin of 12%.

Due to the existing structure, the transaction has been expanded to include six companies, out of which three are the most important:
i) Wolfgang Freiler - the Austrian trading company which is also the parent company of the acquired group;
ii) Polytech Industrie - a manufacturer of high-density polyethylene pipes and pipes for electric cable and optical fiber protection;
iii) ProMoulding - a manufacturer of injected plastic parts;
SIF - is the fourth company involved in the transaction, and it owns industrial assets that are not currently utilized in production.
TeraPlast pointed out that following the completion of the transaction the structure of Freiler Group will be a reorganised.

Wolfgang Friler Group - transaction overview

Source: TeraPlast

Wolfgang Friler Group - transaction overview

X

Source: TeraPlast

The Wolfgang Freiler Group boasts modern production facilities in Hungary and an active distribution division in Austria. The group comprises two factories in Hungary: Pro-Moulding and Polytech.

Freiler's products are sold in Hungary, the Czech Republic, Austria, Germany, and France, where the companies have established a strong market presence. Additionally, the acquisition includes a five-hectare industrial base and warehouses located in the southwest of Hungary.
Looking at the transaction's synergies, Freiler's acquisition will allow TeraPlast to:

• extend its geographical footprint towards Western Europe and also to load the production capacities that were put into operation in the recent years;
• enter into markets that are difficult to access from the point of view of particularity (i.e. technical specifications) and logistic efficiency;
• increase exposure to shared suppliers and improved logistics flexibility, leading to cost optimization.

Additionally, the Freiler Group brings with them notable expertise in the production of pipes made from recycled materials as over 80% of Polytech's revenues are coming from pipes that are made of recycled plastics. This aligns well with the TeraPlast's philosophy of leading the European circular economy movement, which involves an increasing use of infrastructure products made from recycled materials.

In September 2021, TeraPlast carried out a share capital increase of RON 43.6 mn, following the sale of its shares in TeraSteel Romania and Serbia and Wetterbest to Kingspan group in February 2021.

Currently, the subscribed and paid-up capital of the company stands at RON 217.9 mn, divided into 2.17 bn registered, ordinary, indivisible shares, which are freely transferable. The shares, which are issued in dematerialized form, have a nominal value of RON 0.1, and provide owners with equal rights.

Since 2020, the TeraPlast's shares are included in the Bucharest Stock Exchange reference index (i.e. BET), in the Small Cap and Global All Cap indices of FTSE Russell, in the MSCI Frontier IMI (Investable Market Index) indices and in the CECE MidCap.
Furthermore, starting with March 2023, the company's share returned in ROTX EUR indices of the Vienna Stock Exchange.

TeraPlast is headed by a Board of Directors (BoD) whose members are appointed for a four-year term, with the possibility of re-election. The members of BoD were re-elected during the OGMS of September 14, 2023 by the majority of the company’s shareholders for the period September 14, 2023-September, 14 2027. TeraPlast’s BoD is composed of five members, namely: Mr. Dorel Goia, Mr. Lucian-Claudiu Anghel, Mr. Vasile Puscas, Mr. Vlad-Nicolae Neacsu, Mr. Alexandru Stanean. The President of BoD is Mr. Dorel Goia, while Mr. Stanean have also an executive role withing the management team.

Mr. Dorel Goia— BoD President, Non-Executive

Mr. Dorel Goia is the majority shareholder of TeraPlast and holds the position of BoD President since 2008. Mr. Goia is also member within the Nomination and Remuneration Committee and within the BoD for Parc SA and Hermes SA. He graduated from the Faculty of History and Philosophy within the Babes Bolyai University in Cluj-Napoca, being a former history teacher and businessman as of 1990.

Mr. Lucian-Claudiu Anghel— Independent Director, Non-Executive

Mr. Lucian Anghel joined TeraPlast in January 2021 and since then he is an independent director of BoD. He also holds the position of Chairman within the Nomination and Remuneration Committee and is member of the Audit Committee. Mr. Anghel has a PhD in economics, a bachelor's degree in cybernetics and economics, and he also completed a postgraduate course at Washington Georgetown University.

He has over 25 years of experience in the financial-banking industry, holding various management positions such as chief economist, coordinator of the privatization structuring plan, deputy treasurer, director of strategy, and CEO of institutions such as banks and a pension fund.

Mr. Anghel worked as an external expert for the World Bank and hold the position of Chairman of the Bucharest Stock Exchange Board for eight years. Currently, he holds the position of vice-president of Bittnet Systems SA and teaches at well-known universities, such as: the Academy of Economic Studies and the National School of Political and Administrative Sciences.

Mr. Vasile Puscas — BoD President, Non-Executive

Mr. Vasile Puscas, PhD, joined TeraPlast's BoD in September 2023 as an independent director, while he is also teaching at the Babes-Bolyai University in Cluj-Napoca. With over 40 years of experience in diplomacy and advisory roles across Romania, Italy, and the USA, Mr. Puscas played a crucial role in Romania's accession to the European Union as the country's chief negotiator with the EU. Since 2018, Mr. Puscas has been a member of Banca Transilvania's Board of Directors.

Mr. Vlad-Nicolae Neacsu — Independent Director, Non-Executive

Mr. Vlad Neacsu joined TeraPlast in September 2020 and since then he is an independent director within the BoD. Currently, he also chairs the Audit Committee and serves as a member of the Nomination and Remuneration Committee for TeraPlast.

Mr. Neacsu holds an Executive MBA from Asebuss Bucharest and a degree in Management from the Academy of Economic Studies from Bucharest. In the past, Mr. Neacsu he was also a BoD’s member for different companies (i.e: Transgaz SA Medias, Impact Developer & Contractor SA Bucharest and Comsig SA Sighisoara). He also has experience in the Romanian financial industry, as he worked for AllianzTiriac Pensii Private and Raiffeisen Capital & Investment.

Mr. Alexandru Stanean — Executive Director

Mr. Alexandru Stanean joined TeraPlast in 2007 and since then he assumed several roles within the company, including Deputy General Manager and Director of Operations — where he oversaw external development. In 2008, he was part of the team that facilitated TeraPlast's IPO. Currently, Mr. Stanean is serving his third term as TeraPlast's CEO.

Furthermore, TeraPlast's executive management is delegated by the BoD through mandate contracts. Presently, Mr. Alexandru Stanean serves as the CEO, while Mrs. Ioana Birta holds the position of CFO, making up the current executive management team at TeraPlast.

Mrs. Ioana Birta — CFO

Mrs. Ioana Birta joined the TeraPlast team back in 2017 when she assumed the role of Chief Financial Officer. She has since been actively involved in various complex projects across the company, including: digitization, automation, and mergers and acquisitions. Her strategic contributions have played a vital role in consolidating and ensuring the sustainable development of the TeraPlast Group.
As a member of both ACCA and CAFR, Mrs. Birta is specialized in finance and accounting and has more than a decade of experience working for leading international audit and advisory firms. From 2013 to 2017, she served as the head of EY's Cluj-Napoca office.

Furthermore, the BoD approved during the meeting from October 12, 2023, the structure of the following committees:

i) Audit Committee (Mr. Vlad-Nicolae Neacsu – chairman; Mr. Dorel Goia – member; Mr. Lucian-Claudiu Anghel – member; Mr. Vasile Puscas – member; Mrs. Andreea Elena Manta – independent member, appointed by the OGMS from September 14, 2023) whose members have a valid mandate until September 14, 2027.

ii) Nomination and Remuneration Committee (Mr. Lucian-Claudiu Anghel – chairman; Mr. Dorel Goia – member; Mr. Vlad-Nicolae Neacsu – member; Mr. Vasile Puscas – member) whose members have a valid mandate until September 27, 2027.

iii) International Development Committee (Mr. Vasile Puscas – chairman; Mr. Dorel Goia – member; Mr. Lucian-Claudiu Anghel – member; Mr. Vlad-Nicolae Neacșu – member) whose members have a valid mandate until September 14, 2027.

According to the ESG Research Reports which were independently prepared by Sustainanalytics, based on a collaboration with the Bucharest Stock Exchange, TeraPlast has obtained the following scores in 2022:

i) ESG Risk Score: 23.4 – Medium ESG risk
This indicator measures the company's ESG risk rating on different business topics (i.e.business ethics, corporate governance, human capital, product governance, resource use, occupational health and safety, human rights-supply chain, emissions, effluents and waste, carbon-own operations).

ii) ESG Risk Rating: 51/159 top 32% performer
This indicator measures the company's risk against its industry peers and against the global universe.

iii) Exposure: 41.6 - Medium exposure;
This indicator refers to the extent to which the company is exposed to different material ESG issues. The exposure takes into consideration subindustry and company-specific factors such as its business model.

iv) Management: 46.5 - Average management of material ESG issues;
Management refers to how well a company is managing its relevant ESG issues. The score assesses the robustness of the company's ESG programs, practices and policies.

v) Momentum: -0.2 - Improvement of the level of unmanaged ESG risks;
This indicator compares the evolution of ESG Risk Rating to the last analyzed period. In our case, we have a negative score that represents an improvement in the level of unmanaged ESG risks.

ESG - Key Performance Indicators in 2022

Source: TeraPlast

ESG - Key Performance Indicators in 2022

X

Source: TeraPlast

In 2023 the company implemented the energy management system in accordance with the ISO 50001 standard and adopted the indicators for increasing energy efficiency and implicitly reducing emissions.

In 2023, TeraPlast has finalised the documentation for the development of renewable energy. This will enable construction of a new photovoltaic plant within the Industrial Park of Saratel and is estimated to become operational by the end of 2024. Total installed power is about 4.56 MWp boasting with power production from its 3.8 MW inverters and a total area of 35k sqm of photovoltaic panels) will aid in lowering emissions by up to 3.2k tons of CO eq annually.

For TeraPlast, ESG principles are a priority, highlighted by the targets that the company assumed within the Sustainability Strategy published in 2022. The company's main ESG objectives for 2023 were related to:

i) environmental protection and resource management

• enhancing the proportion of electricity derived from renewable sources;
• preserving the environmental management system certification to comply with the ISO 14001 standard;
• certifying the energy management system as per ISO 50001;
• developing a distinct plan for reducing our environmental impact.

ii) reduction of greenhouse gas (GHG) emissions

• calculating the carbon footprint of scope 3, which includes emissions from external activities(i.e. supply chain, transportation, and end-of-life treatment);
• upon completing the Group's carbon footprint calculation (scopes 1, 2, and 3), the company will devise a Climate Change Commitment and execute strategies to curtail the Group's carbon footprint;
• adapting the business strategies to incorporate targets for reducing the carbon footprint.

iii) waste management and circular economy

• decrease the amount of waste sent to disposal facilities and increase the rate of recovery for generated waste;
• conducting training to raise employee awareness of the significance of selective waste collection and the advantages of recycling.

iv) employee recruitment and retention

• integration of 20 non-EU workers, and promoting job opportunities among women to encourage gender diversity;
• reducing the staff turnover by at least 3% by implementing a performance bonus system based on monthly KPIs for the production and logistics departments;
• increasing the number of training hours by at least 10%.

Romania's macroeconomic snapshot

Romania is the second-largest EU member in Eastern Europe with an estimated population of 19.7 mn in 2022. Romania's real GDP increased by 2.1% yoy in 2023, well above the growth rate of other countries in the region (i.e. Poland, Czech Republic, and Hungary). Consumer spending rose by 2.9% yoy in 2023, while investments in the economy grew by 12% yoy.

In terms of the main sectors, real GVA (i.e. gross value added) increased in services (2%), construction (11%), and agriculture (10%), from a low base due to 2022 being a dry year). Conversely, GVA from industry decreased by 2.3% yoy in real terms in 2023, owing to adverse business conditions in foreign markets and a decline in activity in industrial branches that consume high amounts of energy resources.

For 2024, our economists predict that the real GDP will continue to grow throughout all four quarters of the year. The current scenario include a real GDP growth of 2.8% in 2024 compared to 2023. The growth envisages an increase in all components of aggregate demand (incl. consumer spending, investments, and exports of goods and services) as well as an increase in activity across all major sectors of activity, such as services, industry, and construction for 2024.

Romanian construction market

According to the data provided by the National Institute of Statistics (i.e. INS), in 2023 there was a significant rise of 14.2% in the volume of construction activities as compared to 2022. This growth was primarily driven by a 33.2% increase in the volume of engineering construction works. However, non-residential construction activities only saw a meager annual growth of 2.3% in 2023, while residential construction activities saw a decline of 6.6%.

For 2024, our economists expect the development of construction works to remain favorable this year, continuing to benefit from the increase in public investment works.

Romania's National Recovery and Resilience Plan

Romania's National Recovery and Resilience Plan (i.e. NRRP) will be financed by EUR 14.2 bn in grants and EUR 14.9 bn in loans and will support the implementation by 2026 of crucial investment and reform measures. In 2024, key investment funds available for the construction sector are valued at EUR 1.88 bn, out of which:
i) EUR 968 mn are allocated to water management infrastructure;
ii) EUR 559 mn are for waste management;
ii) EUR 15 mn are for renovation wave - increasing energy efficiency for old buildings;

In addition, at the national level, the funds available are related to Anghel Saligny program (i.e. EUR 6 bn) and POIM program (i.e. large infrastructure operational program - EUR 3 bn).

Romanian pipes market - overview

As of 2022, the Romanian pipes market was valued at 317 EUR mn, divided 59%-41% between PEHD pipes market and respectively PVC pipes market. The PEHD pipes market had a CAGR of 18% between 2020-2022, resulting in a revenue of EUR 187 mn in 2022. In terms of volumes sold, the PEHD pipes market had a CAGR of 7%, with approx. 86k tons sold. In 2022, the market was led by PEHD pipes for water, accounting for 64% of the sales in absolute values and 66% of the volumes sold.

Between 2020-2022, the PVC pipes market had a CAGR of 31% and reached EUR 130 mn in 2022. In terms of volumes sold, the PVC pipes market had a flattish evolution, reflected by 1% CAGR which was translated into around 63k tons sold. Looking at the market decomposition in 2022, the PVC pipes market is leaded by the pipes for external sewerage both in absolute values (i.e. 78% of the sales in 2022) and quantitative values (i.e. 85% of the volumes sold).