Top Manager in Discussion: Herbert Fisch, CEO of BASF Hungária Kft.
Thanks not least to its broad, market-appropriate product portfolio, BASF Hungária Kft. can look back on another successful year.
How has the current year been?
Excellent. Although we had a strong basis with the results of 2010, we again achieved a double-digit increase in turnover. Our Hungarian company isn’t alone in that, incidentally. The BASF subsidiaries in the other countries of my area of responsibility, southeast Europe, grew dynamically again this year. Worldwide 2011 will go down as a good year in the history of BASF. We had the strongest growth in southeast Europe in Romania and Bulgaria. Even taking into the account the fact that we started from a relatively low level there, the growth is still impressive. It derives in part from the need for improvement of the infrastructure there and the development of agriculture. The metro is being expanded in Sofia and huge embankment dam projects are being planned in Bosnia. In these countries a lot of money is also being invested in the expansion of the motorway network, which interests us especially if it involves tunnels being built. The large infrastructural projects in my sphere of responsibility are currently definitely not in Hungary.
How is your growth divided among the various areas?
We managed to record very strong increases in the area of plastics, chemicals and in particular special chemicals. We also managed to achieve good growth in detergents for washing and cleaning agents. We were pleased by the surprisingly good growth in the field of agriculture. The yields and prices of agricultural products have risen in Hungary too. That means there is more money from the market, from which we also profit. Although we managed to increase somewhat when it comes to insulating materials, we did not grow in the construction field.
How do you explain the slight growth in turnover for insulating materials?
It is a question above all of the improvement of the energy values of existing building structures. In this field permanent subsidies by the state are very important. Without those it is difficult for homeowners to afford such investments in insulation. I think there is still need for action in this area in Hungary. Although there are programmes for the renovation of prefabricated buildings, they are too inconsistent, especially in terms of improving the heat insulation of blocks of flats. The fact that sales of insulating materials have improved slightly this year should not be taken as an indicator of construction activity picking up in general. The construction sector is still at rock bottom. We can see that clearly when we look at our sales of concrete additive products.
What drives your turnover in the case of plastics and chemicals?
Mainly the automobile industry and above all the increased exports of the companies. However, we can also see indications that internal consumption in Hungary is growing, not least because of large buyers. In the case of the automobile industry we have a whole range of relevant products, from plastic to liquids for the engine area, such as fuel additives, and pigments in all variations. Our products are contained in many construction parts that are produced by our customers. In addition to the automotive companies there have been other growth engines in Hungary. It is partly individual firms that have boosted our growth perceptibly. That is true, for example, of a large paper producer, whose new production line started up last year and whom we supply with aqueous dispersions, and had a beneficial effect on our growth.
Leaving aside the construction industry, you seem to have a product portfolio that consists solely of economic driving forces.
Yes, thanks to our permanent efforts we have a product portfolio that meets the requirements of the market very well. Thanks to the acquisition of CIBA in 2009 many specialities entered our product portfolio that are selling well now, such as pigments for plastics and UV filters for sun lotions. The acquisition of the company Cognis in 2010 brought us further beauty-care products and detergents. We are now profiting greatly from that move too. On the other hand we have also partly given up products. We are now running the styrene polymer field in a joint venture with Ineos in the company Styrolution. Portfolio optimisation is an ongoing, dynamic process. We always look at what really fits us and our markets, at which products have a good future and which don’t any more. Such decisions are not easy because they have to be made relatively early when the product is still doing well on the market. The best example of that is our cassette division. Although BASF more or less invented the tape and profited from that product group for a very long time, that field was sold nevertheless in the ’90s because it was foreseeable that those products were nearing the end of their lifecycle. Permanent portfolio optimisation is flanked by permanent innovations.
BASF doesn’t only sell in Hungary, it also produces. How is your production subsidiary Poliuretán Hungária in Solymár faring?
That company is also doing good business, thanks not least to many orders from abroad. Next year investment in a new warehouse is planned. The permits for that are already available.
What is your opinion of the government’s economic policy?
We can get along with it. After all, we are not negatively affected by any of the measures. However, I find it problematic that many things are discussed, creating agitation, when they are not yet ripe for decision at all. Many basic conditions are simply changing far too quickly. We can see that the government is trying with all means to change things for the better. However, more clarity and reliability are needed. Currently we are dealing with such an uncertain environment that we ourselves are not sure whether a special tax will suddenly be levied on us at some point.
Do you have plans to invest in Hungary?
There is no specific investment project. For us, however, it is very important to know even now what we can expect in Hungary in that case. There are repeatedly expansions in our group and it is good if the option of Hungary can be included in the decision-making. Hungary is an interesting country with well-trained people and relatively well-developed infrastructure. There are many advantages here that one should make use of. So far in the region we have two chemicals production construction sites, one in Croatia and one in Romania, and then Poliuretán Hungária here in Solymár. Those are not huge factories and they produce in a very locally oriented way. There could be more of them in the future, including in Hungary. HITA [Hungarian Investment and Trade Agency], incidentally, is performing good work in terms of offering investment advice.
Where do you think there is further need for improvement in terms of economic policy?
When it comes to taxation, for example, there is too much talk and open speculating about new taxes or other tax rates and too little is actually firmly decided. That isn’t easy for companies. Currently that is our largest problem too. The administration needs to learn to draw a line sometimes and not to start making changes again one month later. For companies it is important to be able to adjust to something and to rely on that. Employment law is another topic with too many questions up in the air at the moment. It would also be good to speak with the sectors concerned before making decisions. The German-Hungarian Chamber of Industry and Commerce, for example, provides a good platform for that. Otherwise business leaders of Hungarian subsidiaries of foreign companies have to do too much explaining to their parent companies.
Do you also feel a need for explanations when it comes to the political measures of the Orbán government?
Yes, certainly. The political environment is very important to us and we pay a great deal of attention to it. What environment future investments are carried out in is extremely important. Political considerations also play an important role when it comes to investment decisions. Countries like Poland that can act very rationally and steadily score well in that respect. There are very concrete reasons for the high degree of attention paid to political circumstances. For us the country’s relationship to the EU and how quickly and thoroughly regulations are adopted is important. We employ around 1,100 people in this region and 120 in Hungary alone. Of course we have a great interest in the legal conditions being roughly comparable. We’re a company that thinks in European and global dimensions. If individual countries go it alone that involves unnecessary time and expense for us.
Surely the icing on the cake would be a common currency?
That is not the most important thing for us at the moment. At present we see a greater need for action in terms of bringing national regulations more into line.