Milán Palkovics, President of the Board of Directors
The business started as a limited liability company in 2004, and in October 2006 Milán Palkovics, President of the Board of Directors, joined the company, which has since become a private company limited by shares. It started as a steel structure manufacturer and became a general con- tractor in 2007. From the beginning, the company targeted multinational companies with its products and services, with Tesco being its first major customer. This has brought stability and predictability in terms of sales revenue, minimised risk and was a good reference in the market, which is important in the construction industry.
Initially, department stores were converted, with more than half of the smaller shops converted by Épduferr. It later joined MOL and gradually started to build the divisions of the company that were able to win ongoing contracts in the commercial and industrial environment.
It was transformed into a private company limited by shares in 2012 and started trading building materials in 2013. It was involved in completely different businesses (radio, café, mining), but realised they were a distraction from the main business, so got rid of them.
At the beginning there were four owners; since then two have left the company. Their central site consists of a roughly. 300 m2 office and an almost 700 m2 production hall for assembling steel structures. Their employee headcount is around 45, and they are constantly recruiting, partly because they have started steel trading and processing. In addition to their own staff, they use subcontractors for general construction projects, and can also carry out the design part of the project themselves if required. Épduferr Zrt. intends to continue steel trading and processing in the domestic and export markets, which will pave the way for expansion abroad. It aims to extend these activities successfully to international markets.
The pandemic has not particularly disrupted Épduferr’s business, with the construction industry trying to work without interruption. “I see more of a problem in this respect in companies that employ a lot of foreign workers, such as structural engineering”.
The global rise in building material prices has also affected Épduferr. “We have customers who will compensate us for price increases of more than 5%, and I have been able to close recent contracts in this way. But you also need a customer who can see exactly what is happening in the market and, for them, meeting deadlines and quality are more important”. In any case, it is not practical to pass such a risk entirely onto the contractor; it’s the customer who should bear this risk, not the general contractor.
Demand for building materials is very strong in the market, and we set prices for wood and steel products on a daily basis. Paint prices have doubled in a few months. (The interview was made in August 2021, ed.) “My personal opinion is that there will be a slowdown in the residential construction market at such prices, and that builders will think twice before starting a project. It will be clearer next spring.”
This is where the efficiency of Épduferr’s strategy becomes apparent, as multinational companies have other, possibly more important considerations than construction prices. The plans also include property development. “A typical property developer sits in the office and draws up plans. But we sell building materials and we understand general construction and design, we have an extensive network of suppliers; in other words, we can go into a project with much more confidence and efficiency, we have more reserves, and we can get more out of them.”
Épduferr decided a year ago to start an intensive development phase, and they want to diversify their activities, including steel trading and sheet metal processing. When developing new business lies, it is important that they also produce for export. The nature of the building materials trade is territorially limited; transport costs do not allow for out-of-location sales, and expansion can only be achieved by expanding the distribution network. However, the coverage of general construction is nationwide, with projects in many parts of Hungary. Trading and sheet-metal processing (production of semi-finished or finished parts) is aimed at finding domestic and foreign customers to whom they can supply small to medium series, such as the machinery and automotive industries and electronics.
Developments will require capital, some of which will be raised from external investors and the company’s shares will be listed on the BSE’s Xtend market. “Going public has a number of advantages; for example, it gives you publicity that is positive for buyers, such as multinationals operating in a highly regulated environment”. A multinational company is attracted to suppliers who are familiar with the franchise concept, who are environmentally responsible, and who work according to similar rules and standards as they do. “We expect that, by going public, we’ll find new customers who will help us grow, and we will be able to access easily available and lower-cost funding. We can grow more easily and faster”.
In the next five years, the CEO wants to make Épduferr one of the leading companies in Hungary, a sound and diversified company with a sales revenue growing in line with this. This year, the company will complete the installation of a software-based ERP system and the transformation of its organisation.
“If I could go back in time, I would listen to my instincts more—they usually work”, says Milán Palkovics. The business sector tends to emphasise awareness and rationality. However, it’s also important that ideas and feelings about the operation and future of the company are expressed.
The Company has taken a number of steps to prepare for a possible listing on the stock exchange. One example is the transition to IFRS accounting in 2017.
The fact that his parents were also entrepreneurs played a big role in his success in becoming an entrepreneur. “Being born into that kind of environment gave me a strong sense of stability and commitment to work”.