Hüseyin Bilmaç: Our company has been established officially in 1998 through partnership of Eczacıbaşı Holding and Koramic Building Products SA on the equal share basis. Purpose of the company was to produce products with higher quality in the sector of building chemicals in Turkey. We planned to open the facility in September 1999, but opening date was deferred due to the earthquake disaster. We have commenced production activities in the beginning of 2000, and offered the preliminary products to the market. Eczacıbaşı Koramic Building Chemicals produces VitrA Fix brand products.

As known, this brand is one of the most prestigious brands of Turkey, and deemed as equivalent of the quality. I can therefore say with pride that we have a production facility equipped with the most advanced technologies of Turkey and Europe at present. Our production capacity is 100.000 tons per year which includes powder, liquid, and paste type products. Technology of our factory is very important since our factory is unique in Turkey which is capable of carrying out production with such a capacity by means of only five people. It had not been possible until now to achieve such a capacity with only five people. Production of building chemicals is generally a labor intensive sector. Our country experienced cheaper solutions in this sector for years in the past instead of making investments in automation and the concept of quality to be derived therefrom. These investments had not been deemed as a preferred method in the sector.

Hüseyin Bilmaç: We have investment projects in place both in the country and at abroad. One of the most important domestic projects is to establish pilot production facilities in certain locations of the country within the year 2006, and we are about to complete our activities to identify suitable locations for this purpose. We are planning to carry out investment projects at abroad with our sister companies. Although all the feasibility studies are ready for the said projects, we consider to implement these investments in the years 2007 and 2008.

Hüseyin Bilmaç: We have seven main groups of products. We have launched two new products in the field of tile adhesive mortars in the year 2005. One of these new products is Floor Plus which is used on floors, is fluid, easy- to-apply product due to its self-levelling properties, and used to fix large tiles to large spaces. Second product is VitrA Fix Ultra System which is a high performance, and double-component product used to fix large tiles to outer façades of buildings up to a certain height. Although we have added no new product to our epoxy and cement based products in the group of grouting materials, we have enriched our group of auxiliary materials with many new products. Some of them have been launched, and some shall be launched in the year 2006. Among these new products are VitrA Fix Joint Cleaner which is used to clean joints, and VitrA Fix Antimold which is used to remove mold and moss formations which take place at wet locations of buildings. We have also a stain remover used to remove stains from the system and tiles after application, a paint remover, and a surface protection product which is used to prevent formation of stains on surfaces such as marble, granite, porcelain tile, and etc. However our efforts have been focused on the group of water insulation materials and alums. In addition to the available products such as VitrA Fix Hydrostop, VitrA Fix Proof, and VitrA Fix Hydrosil, we have improved our portfolio of products by adding five new products, namely VitrA Fix Proof SS, VitrA Fix Proof PE, VitrA Fix Proof SS Priming Agent, VitrA Fix Proof Sulfate, and VitrA Fix Proof HG. All the activities required for launching of these products have been completed, and shall be available at the marketplace starting from the year 2006. In fact, Proof SS, Proof PE, and Proof SS Priming Agent are the components of a set of three products named VitrA Fix Water Stop System which ensures water insulation from the negative side. We have achieved to reinforce our position in the water insulation sector with our portfolio improved with these new products.

Furthermore, we consider that the growth experienced in the construction sector in the first half of the year 2005 shall accelerate in the year 2006. Therefore, like our competitors, we wish to become ready for the year 2006 with a portfolio reinforced with new products as well as a sufficient capacity. The first one of our activities intended to increase the capacity is a new full automatic production line which we consider to start at the end of December, and complete in the year 2006. All these investments are based on our positive expectations about the developments in the construction sector in the year 2006.

Hüseyin Bilmaç: Magnitude of the tile adhesives and joint fills market is about 400.000 tons in Turkey. We consider us in the top three companies of the market. For a newly established company, it is sufficient for us to be in the top three companies for now. Of course, we aim to be the top company on the quantitative basis. In Turkey, companies with high tonnage targets have been ignoring the quality in the artificial environment of competition during recent years. Therefore, quantitative magnitudes declared do not give a rather clear picture. We have a share in the domestic market by over 10%.

Hüseyin Bilmaç: While utilization ratio of tile adhesion mortars to conventional mortars was 50%/ 50% a decade ago, this ratio is 75%/25% in favor of ready mortars at present. In my opinion, this rate would reach to 85 to 90% in the next five years based on joint efforts of our competitors and us which are not inferior to manufacturers of the advanced countries in terms of technological infrastructures and know-how levels. Increase in consumption depends on continuance of user trainings in a systematical manner, and marketing activities of manufacturers at the marketplace. Furthermore, new professorships at construction and architecture departments of our universities about building chemicals would improve quality of our buildings and utilization of building chemicals in a conscious manner.

Another factor is that technical products have been offered to the domestic market with affordable prices during recent years as a result of the competitive conditions created at the marketplace. All these factors would lead to an increase in consumption of building chemicals.

Hüseyin Bilmaç: Of course, we should answer this question based on the country to which we compare our country. Dynamism of the domestic construction sector forces many European companies to make investments in our country. I assume that the increase in our production capacities is beyond that of many European countries. This sector is regulated by the companies of Italian, German, and French companies in the world. Our country has a surplus capacity. Companies use a portion of their capacities for production purposes. I assume that our capacity utilization ratio is about 70/30. However European or American manufacturers use almost 100% of their capacities.

Hüseyin Bilmaç: Export is one of the very important concepts for us. We believe that we have pioneered the sector in Turkey in this regard. Export activities had not been deemed important in the domestic sector of building chemicals. Of course, it is not us who began export activities first; however, I can state that as a company of only four years old, we aim to realize one of the most important export activities of Turkey. We are actually exporting our products to 37 countries. Among these countries are Cyprus, Israel, Palestine, Saudi Arabia, Jordan, Uzbekistan, Tanzania, Egypt, Algeria, Georgia, Lebanon, Island, Russia, Ireland, England, Greece, Azerbaijani, Kazakhstan, Ukraine, and Bulgaria. It may be wondered how we have expanded our sales to such huge number of countries. We have made use of the synergy created by Eczacıbaşı Group among its companies for this purpose. The group has marketing organizations in various countries of the world under the name VitrA, such as England, Germany, Russia, USA, and etc. And there are liaison offices in other countries. Consequently we have acquired a market presence easily. In fact, VitrA is a well known brand in many western countries. However we have gone beyond this point, and aimed to sell our products to African countries. For example, we are shipping our products to Tanzania, and have made quotations for Benin, Gabon, Ivory Coasts, and Nigeria. It is interesting to see goods of Turkish origin in these countries. However our sales activities are focused mainly on the countries of the Middle East, Ireland, and England. I can say that we have become a very important brand in Ireland. Eczacıbaşı Karo Seramik, i.e. our sister company, has a production plant as well as a sales and distribution organization in Ireland. It is more difficult to make sales to Ireland and England than to Africa since quality is a more dominant factor in these countries. You can deem yourself very successful if you manage to compete with the local manufacturers in terms of both your prices and quality in these countries. Our products also have a market presence in Saudi Arabia, and also in Island which is a rather cold country. Building chemicals may give rather different reactions depending upon climate conditions at the time of application. Our product does not lead to problems in Island, and we also be able to provide with our clients in Saudi Arabia with a product which can be applied at high temperatures thanks to a different formulation.

At present, export sales represent 35%, and domestic sales represent 65% of our total sales volumes. However we aim to achieve the ratio of 50/50% in respect of export sales and domestic sales

Like many other sectors, prerequisites of being a member of EU such as compliance with EN norms, CE certification, publication of MSDSs, lack of chromium VI in cement-based products, and C certification for adhesives shall ensure that many important criteria such as technical competency, compliance with hygiene conditions and human health shall become mandatory in our country. This shall lead to improvements in overall quality, and prevention of unfair competition at the marketplace as a result of compliance by other manufacturers of the market with the certain quality criteria which we have made a principle of operation, and even a life style since establishment of our company.

What is the level of interest shown by the foreign capital in the sector?

A considerable inflow of foreign capital has taken place during the last decade. Some European manufacturers have gained presence at the sector in the capacity of manufacturers and sellers directly or via cooperation with a Turkish partner. The fact that domestic building sector is more dynamic than European markets causes many important foreign manufacturers to show an interest in Turkey. Foreign capital gains presence in Turkey via capital, know-how or both. I estimate that foreign capital in Turkey amounts to over Eur 100 Million.

In fact, I mentioned this matter above. Turkish standards are currently being modified one by one pursuant to the laws of harmonization with EU. However, I believe that we should act faster in this respect. Many large-sized manufacturers hold ISO certificates. Both TSE and international certification bodies conduct routine inspections on manufacturers pursuant to the applicable regulations.

Would you please state problems of your sector under main headings, and explain your solution proposals?

Among primary problems suffered by our sector are imitation of brands, out-of-standard cheap products, attempts of many small-scaled manufacturers to produce products which are not compatible with the applicable technical standards of the sector, and offer them under extremely competitive conditions at local markets, increases in transportation costs up to 25% of overall costs depending upon distances due to increases in fuel oil prices, attempts to solicit trained personnel of other companies instead of training own personnel staff, ignorance of this matter by companies other than few companies which attach importance to training of their personnel staffs, and unrecorded commercial activities... These are the ones I remember at first moment although there are countless problems in the sector.

My solution proposals are that out-of-standard production activities should be banned; no license should be granted to companies which lack a certain capacity and know-how; on-site trainings should be organized throughout the year with support of the state and universities; financial controls should be carried out on a more strict manner; and use of railways should be encouraged for transportation purposes which is a general problem of our country.

- What are your final words ?

I would like to thank you for this interview. And I hope the year 2006 would be successful and profitable for our country and our sector.

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