Q. Mr. Shoylekov can you tell us something more about the current financial results of Orgachim Jsc and of the company's expectations in the short-term, and mid-term perspective?
Orgachim's sales revenues grow at a steady pace each year. This is something we also saw this year – at the end of H1 our sales revenues were up 30% y/y.
Most of our revenue comes from sales of ready production. H1 after-tax profit stood at 6.326 mln leva (3.234 mln euros), versus 1.045 mln leva (534,300 euros)a year ago.
The management expects revenues to continue to grow at the same pace.
As you know, our business is dependent upon the atmospheric conditions. If temperatures drop too low, it could have a negative impact on construction activities, and respectively, on our sales.
In the mid-term perspective we are expecting to increase our market share. This optimism is supported by the fact that our company is investing in the newest technologies for production of paints and lacquers, in compliance with EU standards and requirement. Orgachim employs experts, which have proved their skills and knowledge many times. This lets us believe that we are going in the right direction and that there is no reason to think our development may be obstructed.
Q. Are there any plans for capital increase using own funds or in another way?
Currently there are no such plans. A decision like that must be taken by the general meeting of shareholders. If this happens, we will inform BSE and the media in due time.
Anton Danailov, project manager Orgachim JSC
Around 85-90% of business processes go through the modules of Oracle Oracle e-Business Suite (EBS). As a result of the system's installation, the company is able to issue up-to-date information quickly and accurately in the dynamically changing data dimensions.
Orgachim is the biggest Bulgarian manufacturer or paints, lacquers, resins, and other chemical products for the machine-building industry, the construction sector, furniture manufacturers, electrical engineering, and other industries. The company has introduced more than 20 brands on the market over the past several years. Some of the most popular are LEKO, DEKO PROFESSIONAL, FASAGEN, BLAGO, MEFISTO, HAMELKON, etc.
Apart from being an important player on the Bulgarian market, Orgachim exports more than 40% of its production to Turkey, Greece, Egypt, The Far East, Romania, some of the former Soviet Republics etc.
More than 2 years ago Orgachim decided to install an ERP-system. The company chose the Oracle EBS and used the partner services of Fadata.
Priorities and objectives
The main objectives and priorities with the installation of Oracle EBS were as follows:
-integration of data coming from several sources, and easy access to information presented in a useful form;
-facilitating calculation of products' prime cost;
-improvement of analyses of revenues, profit, costs etc in order to improve planning of the company business processes.
I insist on pointing out that there is yet no integrated system for business management in Bulgaria, that is fully localized and adjusted to local business practices. Most system are simply imposing the Western models.
Orgachim is the first Bulgarian company to introduce the production regime module Oracle EBS – Oracle Process Manufacturing (OPM), the company has been using the module for ten months now. Orgachim is also working with the modules Payables, Receivables, and General Ledger – all part of Oracle Finance. Other modules used are – Purchasing, Order Management, Inventory/OPM Inventory.
85-90% of business process go through the Oracle EBS modules. Outside the ERP system are only the pay-roll and social security calculations, as regulations in the filed are constantly changing and no certain model can be established at this moment in the country.
Another area where a ready software proved unsuitable is retail sales. I am proud to say that, as of the beginning of the year, we are working with our own retail-application software, fully integrated with Oracle, flexible and suitable to the retail sector. Of course, both systems have interface for automatic data inflow to the Oracle accounting system.
The installation and operation of such integrated systems is a very complicated thing to do. They facilitate the process in the end, but before that a difficult process of introduction, and restructuring must be competed in the company.
Such large-scale changes are a very difficult thing to accomplish, because they involve making people change the practices they have been using for decades, and such efforts often meet a lot of resistance.
Also, an integrated system often imposes a very strict control on business practices. Each move must be recorded, starting with the first talks with a potential client, and ending with reporting the reasons for not signing a contract. Standardization of all processes is required, i. e. introduction of principles and rules, which employees are not allowed to neglect.
Since all information must be registered with the system, we can eliminate the so-called “black books” of employees. The management is completely aware of the extent of information that reaches each employee, and is thus able to assess the adequacy of the decision they take.
The system allows full control of all process in an economic organization – control over clients' credit limits, over delayed payments, over all types of payments (icl. advance) to suppliers or others, orders and requests to/from suppliers/clients, inspection of inventory etc.
Also, at any given moment the system can provide accurate and prompt information to all types of info inquiries.
One of the weak points we must admit to ourselves at the moment, is that the company is not making use of all the opportunities for automatic planning. This is due to the specifics and seasonal character of our activity.
Current and Future Projects
The introduction of the Oracle e-Business Suite on January 1 this year has been the largest project so far. This required a lot of efforts on the part of both the experts in Oracle and Orgachim. We must also say that CEO Ivan Sokolov and financial manager Boyko Shoylekov were very strict in imposing the system and requiring everybody to comply with it.
Other large projects were the creation of the retail-application for our shops, etc.
In the short term perspective we are working on programs that would automate payments to suppliers, improve the system for providing information to inquiries on production activity, and improve the productivity of the ERP system.
In the process of introduction of integrated systems for business management several issue may arise on both internal and external level.
Internal problems are related to the way employees will adopt the new practices. Sometimes the process may require changes in the organizational structure of the company. Hiring or replacing qualified personnel, that meets the new requirements may be a serious problem.
External problems are related to choosing an experienced consultants company to implement the system. There is a serious shortage of qualified experts in this filed, as they need to possess both theoretical knowledge and experience. Most Bulgarian companies installing ERP systems have technical experience only with their own software developments.
Another part of the problem is that external users of the system (government , municipal, or financial institutions etc.) lack knowledge about it.
I can say that business in Bulgaria is just starting to use the ERP systems for control and planning of resources. Serious changes are still necessary before these systems become fully integrated in Bulgaria - changes of the way people think, as well as in the requirements that the Government, the municipal and other institutions have for the company providing the information.