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INTERVIEW: Andrzej Przybyło, AB

by Stuart Wilson, Thursday 12 January 2012

Poland-based distribution outfit AB has continued to strengthen its position as a dominant player in the Central and Eastern European (CEE) channel. Senior representatives from AB are attending next month’s DISTREE EMEA channel event in Monaco to meet with both existing and potential vendor partners. Andrzej Przybyło, chairman of the board at AB, explains to www.channelemea.com how the company has developed in the last year and its plans for 2012.

Channel EMEA (CE): How satisfied are you with AB’s business development in 2011 and how have the market conditions changed in the countries you operate in?

Andrzej Przybyło (AP): In 2011, AB strengthened its regional position of the largest IT and consumer electronics distributor. AT Computers (ATC), the subsidiary belonging to the AB capital group, in term of available data, has outpaced, in revenue, the hitherto largest player, eD Systems, taking over the leadership position in the Czech market. At the time of acquisition [in 2007], ATC was number three, while in Slovakia, we have grown from the sixth to third place, recording high growth.

In the Polish market we have reached the revenue level of the existing leader. We consistently grow in local markets and we are enlarging competitive advantage in terms of the entire region. That’s a big success. For 14 consecutive quarters, we have recorded systematic growth across all key financial indicators. Consolidated revenue of AB group for the 2010-2011 fiscal year amounted to US$1.03 billion, with net profits ofto US$15.3m.

Logistics centre

CE: What new developments have been put in place at AB in the last 12 months and how important is it continue developing and diversifying your business activities and operations?

AP: In the last 2010-2011 fiscal year we have signed 79 new distribution agreements. Another dozen agreements are currently being negotiated. We are diversifying our business by increasing the product portfolio and expanding our commercial channel. Currently we have almost 14000 permanent partners. In the last quarter alone – the first quarter of fiscal 2011-2012 - AB has signed another 18 distribution agreements, including contracts with vendors such as Seagate, Dell and Apple. In the case of Apple, it is worth mentioning that we have been chosen as the only broadline distributor in the Polish market and in the Czech market a year earlier.

We have begun preparations for the construction of a new logistics centre. On a 14.8-hectare plot near the entrance on the Wrocław ring road there will be one of the most modern logistics centres in the region. The maximum target space will be 27,000 square metres, while the volume will be 364,500 cubic metres. The planned number of pallet lots will also be increased to 34,000 from 10,000. What is important from the finance point of view for this investment is that we have obtained a subsidy in the amount of 30% of qualified costs from the Innovative Economy programme. According to conditions of the subsidy, the new centre will be constructed by 2015.

In 2011 we continued implementation of a new ERP and BI system across the entire AB group in order to streamline management processes in key business areas. In July this year we completed this process in Poland without the slightest operational downtime. This demonstrates precise planning and execution of all our processes. Using BI tools, we have acquired an extensive controlling, budgeting and reporting solution that ensures tight control of financial and logistics processes.

CE: What is your prediction for the major market and product trends for 2012 in the countries that AB operates in?

AP: It is hard to predict unequivocally how the market will look like in 2012. The future shape of the demand structure will depend to a large extent on the situation on financial markets and its impact on the Polish economy. In my opinion the next year might be very demanding for IT companies. However, the players with stable positions and solid business foundations – such as our company - will have a great chance to generate growth. Our goal, irrespective of the general business climate, is to maintain the growth trend. We believe that we are well-equipped for development in every business environment. We have proven our effectiveness very clearly during the recent crisis, when we achieved record financial results. In terms of the future we are looking at chances for territorial development and we are particularly interested in the markets where we do not have a direct presence.

CE: What does AB do to assist vendors and retailers as they look to move towards more complicated channel models?

AP: From the very beginning of our operations, we placed particular emphasis on the development of our trade channel. A significant segment of our 14,000 partners are small and medium resellers that accounted nearly 53% of our revenue in the last fiscal year. We are for them not only a supplier, but also play a role to educate them, present the latest trends and help them to lead and plan the business. For partners that have the ambition to tackle integration projects, and tender for this business we launched the Enterprise Business Group (EBG), which supports partners in the field of new technologies, procedures, and provides training in three educational centres. These activities are run in close cooperation with our vendors.

We monitor the market on an ongoing basis and analyse trends in demand. Listening to customer needs, we are able to visualise a scenario of the oncoming changes in the market. This is why relations with resellers are of such an importance to us. They speak on behalf of the clients and we listen and try to meet their expectations. In effect, this translates into the ability to put together precise sales planning in certain product groups - an extremely important asset in cooperation with vendors. We also offer vendors a unique platform for communication and provide strong marketing activities for them.

We have received numerous awards from our suppliers including the title of distributor of the year in 2011 from Microsoft. HP recognised AB for the highest level of growth in laser printing device sales in CEE region. Intel recognised AB for outstanding achievement in training on the implementation of server technologies. Our Czech company, ATC, won the title of the best small business partner of 2010 in the CEE region from Cisco.

Building trust

CE: What are the biggest challenges facing AB in 2012? What are the biggest opportunities for AB in 2012?

AP: Our major goal is to further strengthen our regional position. Key goals include: maintaining and strengthening our leadership position as an IT distributor in the region, constantly search for new opportunities of growth including both acquisitions in new markets and organic growth within AB group.

Macroeconomic trends in the global market will certainly be a challenge for us, but here again it should be stressed that, at the time of greatest crisis, we achieved record results, and we are prepared to work even in the toughest conditions.

CE: How does AB get the right internal balance in terms managing both your consumer channel and business channel operations? Does this prevent any challenges?

AP: One of the tasks of a distributor is building trust between resellers and manufacturers. Operating between those entities, we often perform a role of an advisory body, helping the manufacturers to effectively reach an adequate partner channel. Many initiatives are taken by AB such as competence centres, the EBG division and online training. Thanks to these initiatives we reach different target groups, constantly diversifying our trade channels.

CE: How do you see the distribution and channel landscape evolving in the next 12 months. Will we see increased consolidation in the channel?

AP: From our point of view as an IT distributor the market consolidation process has been underway for some time now. We must also emphasise here that in 2011 AB was growing faster than the market, developing at the expense of our competitors. In the last financial year, the growth rate was 23.6% for the entire AB group, and as much as 35.1% for AB in Poland. It is an impressive result that we are very satisfied with. In spite of the fact that in Poland other distributors currently have similar levels of revenue -including exports and sales to subsidiaries - it is AB that has strengthened its regional position as the largest IT and CE distributor. We intend to continue this trend next year through continued organic growth, but have not excluded the possibility of acquisitions in new markets for us.

CE: How much of a concern are the current problems in the eurozone and the possible break-up of the single currency to AB? What sort of contingency planning do you do internally to deal with potential issues that may arise?

AP: It should be remembered that for years we have been operated in several markets, and for the management, dealing with different currencies is our daily bread. We account in four currencies: the euro, US dollar, Polish Zloty and Czech Koruna. The potential collapse of the eurozone in terms of currency risk management will not be a problem for us. Paradoxically, we can gain an advantage over competitors who do not have such experience. We have developed an effective model of foreign exchange hedging, resulting in bringing down the currency fluctuation risk to zero. From the point of view of our net results, we don’t lose and we don’t gain.

CE: How important is the relationship and understanding that AB has with its vendors to the business? How do you see these relationships changing and evolving as vendors look for new ways and new routes-to-market in terms of their channel business?

AP: We care a great deal about the relations we develop with our trade partners. In our work, we put great emphasis on the business support given to resellers. This is why we strive to extend cooperation with our suppliers. This gives us an opportunity to organise regular meetings and training courses, providing trade partners with knowhow and promotional materials.

One example of our relations could be the fact that Zbigniew Mądry, commercial director and board member at AB was invited to participate in the global Microsoft distribution partner advisory council (DPAC). His nomination was made upon the recommendation of the local Microsoft subsidiary. The DPAC is an ongoing, strategic business forum between the executive leadership of Microsoft and a select number of authorised distributors with strong local or regional presence.

In our business relations we focus on mechanisms to support sales, logistics and technological support, as well as assistance in projects and tenders. We are also implementing new IT tools for partners, such as business-to-consumer and business-to-business shopping platform that helps implement an internet store and e-commerce website based on our product offering. By listening to the market - both consumers and resellers - we help vendors learn more about the markets we operate in and jointly develop sales plans that will make everybody happy in terms of the results achieved.

DISTREE EMEA 2012

Top distributors, retailers and e-tailers from across the EMEA region are invited to attend DISTREE EMEA 2012, the premier event for the regional ICT and CE channel, from February 7-10th in Monaco.

DISTREE EMEA gathers hundreds of senior executives from EMEA’s Information Communications Technologies (ICT) & Consumer Electronics (CE) volume distribution channel.

During the course of the three-day event, delegates take part in thousands of pre-scheduled one-on-one meetings with hundreds of vendors. Each year, hundreds of new distribution agreements are struck across the region as a result of business relationships initiated at DISTREE EMEA.

DISTREE EMEA 2012 will also build on successful initiatives launched at last year’s sold out event including a regional awards ceremony. The ‘EMEA Channel Academy: 2012 Awards’ will include more than 20 categories for vendors and distributors from across the region.

www.distree-emea.com

For more information on attending DISTREE EMEA 2012 please contact fhemraj@distree.com

DISTREE_Events

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