Cersanit Group, through its Ukrainian subsidiary Cersanit Invest, began building a new sanitary ware plant in mid-2006.
Poland’s largest producer of bathroom ceramics and tiles has received more than $100 million in credit to help it finance the construction of a new plant in Ukraine, marking a continuing trend, whereby importers of sanitary wares to Ukraine are becoming in-country producers.
The European Bank for Reconstruction and Development (EBRD) signed an agreement on April 11 to provide Poland’s Cersanit Group with a $109.4 million loan to finance the completion of a new sanitary ware and ceramic tiles facility in Zhytomyr Region in western Ukraine.
Cersanit Group, through its Ukrainian subsidiary Cersanit Invest, began building a new sanitary ware plant in mid-2006 and plans to finish it by the end of 2007.
Cersanit Supervisory Board Chairman Artur Kloczko said the company hopes to launch production by the first quarter of 2008.
The total cost of building the plant will be around $135 million, according to Kloczko, who said his company had applied for the EBRD loan before starting construction.
The work force at the Zhytomyr plant will start at around 700 and will be eventually increased to 2,500, he added.
The plant, Cersanit Group’s first in Ukraine, will produce around 1 million units of sanitary ware and around 7 million square meters of ceramic tile annually.
According to the Donetsk-based International Independent Market Research Center for the Ceramic Industry, the total volume of Ukraine’s tile market is currently around 40 million square meters per annum; the country’s sanitary ware market is some 4.5 million units.
Ceransit Group, which has production facilities in Poland, Romania and Lithuania, manufactures about 4.5 million units of sanitary ware and 50 million square meters of bathroom tiles overall, Kloczko said.
Products from the new Ukrainian plant will be sold in Ukraine only, he added.
“Today we export from Poland the total amount of production that we are going to produce [in Ukraine]. We are just planning to replace our export with local production.”
Kloczko said the completion of its Ukrainian facility will simplify logistics and eliminate customs procedures.
Cersanit has been importing its goods to Ukraine for more than 10 years and opened a representative office in Kyiv a few years back.
“While working in Ukraine, we have gradually increased the volume of our production to Ukraine because the market of the country is growing as well,” Kloczko said.
Market analysts estimate that the tiles and sanitary ware market in Ukraine has been growing by about 15 percent annually, with growth of up to 25 percent expected down the road.
According to the EBRD, almost 52 percent of Ukrainian bathroom tiles and 25 percent of sanitary ware are imported.
Last fall, Finnish-based Sanitec established a joint venture with Ukrbudmaterialy, the Ukrainian building materials corporation that owns Budfarfor, Ukraine’s largest producer of sanitary ware.
Sanitec, a leading European bathroom ceramics manufacturer, holds a 51 percent share in the joint venture, which both owners said would get tens of millions in investment over the next five years.
The Budfarfor plant posted a turnover of $26 million in 2005 (including export sales) and hopes to increase annual turnover to around $100 million in the next five years.
According to Sanitec’s website, Budfarfor produces more than 2.5 million ceramic pieces annually, two-thirds of which is exported.
Cersanit’s new plant and its financial backing from the EBRD also mark the increasing activity of Polish business in Ukraine.
“We hope the project will be one of many investments in Ukraine by Polish companies and that its success will lead to increased Polish investments in this country and the region,” EBRD Director for Poland and the Baltic States Dragica Pilipovic-Chaffey said.
According to Kyiv-based investment bank Dragon Capital, Polish FDI into Ukraine totaled $331 million by the end of the third quarter of last year, making it the country’s seventh largest investor.
