Palax invests in professional users
Celebrating its 60th anniversary of making firewood processors, Palax will not forget the domestic market, but will seek growth in Europe. This requires continuous product development and investment in large professional machines.
This article was published in the "Suomalainen Maaseutu" (Finnish Countryside) supplement of the "Maaseudun tulevaisuus" (Rural Future) newspaper on Sept 9, 2019. Text and photos by Arto Takalampi. English translation by Heidi Eskola.
The firewood processor manufactured by Ylistaron Terästakomo Oy has undergone a considerable transformation in 60 years.
The product range has changed from small firewood processors to large firewood factories used by professionals, the company has established Europe as its main market area, the company’s ownership has been transferred from the Viitamäki family company to the Finnish Industry Group Terra Patris Oy in 2007, and the auxiliary business name and the brand name Palax have also been established.
- We are currently the market leader in Finland. We have manufactured more than 60,000 firewood processors, says Pekka Himanka, Managing Director of Ylistaron Terästakomo Oy.
According to Himanka, Palax's product development and operations are driven by a clear choice: the company manufactures large professional machines for full-time firewood entrepreneurs, especially for its main markets, namely exports.
- We don't want to compete on price. We manufacture the highest quality, reliable and efficient machines that professionals in Central Europe want to purchase, he says.
The focus is also driven by market developments. Finland, Sweden and Norway accounted for 75% of the total market a decade ago. Now Palax concentrates on exports and the volume growth is coming from Central Europe.
Exports already cover two thirds of total sales, featuring thirty exporting countries. In addition to Central Europe, there are exports to Eastern Europe, i.e. Russia, Belarus, Ukraine and the Baltic countries.
- The latter is our most growing market area, Himanka emphasizes.
However, Palax has not abandoned its home market, but rather vice versa. The market share of the Scandinavian countries remains significant and is taken into account in product development.
In the Nordic countries, however, firewood is smaller and softer in diameter, meaning it is made on smaller machines than in Central Europe.
- We want to improve existing machines by listening to users. In order to maintain market share, the product range needs to be renewed regularly and the machines must always have something new, says Himanka.
In the past, Palax had challenges to enter the European market since the company wasn't experienced with hard wood. However, according to Himanka, the differences between other manufacturers have been bridged long ago and Palax has also gained a competitive advantage over time.
- In many ways, we are already at the forefront of product development, and our solutions are copied by companies younger than us, he laughs.
The first decade of the 21st century was the golden age of firewood processors, after which the general recession and the market situation also led to a decline in Palax's volumes and sales. However, from 2014 onwards the market situation improved and the company itself made a conscious investment in development.
- We have grown in the last four years. One-fifth of the growth has come from Finland and the rest from exports. In euro terms, the value of exports has almost doubled, Himanka says.
According to him, the toughest competitors come from Europe, while the low-cost machines from China are not serious competitors. Naturally, there is also competition between the Industry Group Terra Patris' own brands, Japa and Hakki Pilke, in the export markets.
Palax differs from its counterparts Japa and Hakki Pilke as well as its foreign competitors in that it manufactures firewood processors with chainsaws as well as with circular saws, both in the same amount. Others focus mainly on chainsaw equipped firewood processors.
A chain saw machine of the same size is cheaper because its frame is smaller and simpler.
- However, a professional can appreciate the rapid cut of the circular saw, the smaller amount of sawdust and the hard-metal blade which is almost maintenance-free. These factors make a difference when the machine runs thousands of cubic meters of wood, Himanka points out.
Terra Patris dominates the Finnish market
Terra Patris Oy is an interesting company – it owns three major Finnish firewood processor manufacturers: Ylistaron Terästakomo Oy of Palax, Laitilan Rautarakenne Oy of Japa and Maaselän Kone Oy of Hakki Pilke.
Their combined domestic market share is estimated to be around three quarters.
According to Pekka Himanka, Managing Director of Ylistaro Terästakomo, companies compete in the export market where all have their own distribution chains. The same applies to domestic sales where Palax is sold by Hankkija.
- Of course we cooperate a lot. For example, in product development we look at whether it is worthwhile for everyone to develop similar solutions, although everyone has a different way of making machines, he says.
The main benefit at the group level is the joint procurement of certain basic supplies and raw materials. The differences between the machines somewhat limit the utilization of the same components.