AFTER BORROWING MONEY FROM EXIMBANK  Romcab is considering a bonds issue

Cable and conductor maker Romcab Târgu Mureş is working on an issue of convertible bonds and will co-opt in this process the IFC, the investment division of the World Bank. A the same time, the officials of the company are considering raising funding through share capital increases. Romcab is currently listed on the Rasdaq market.

The manager of the company, Zoltan Prosszer, said: "We are considering a listing on the first tier of the BSE, and at the same time we are also considering a bonds issue through the BSE. We are working on a strategy together with BT Securities to see which option would be the most advantageous for us and to see what would requirements we would have to meet for a listing. It is obvious that the Rasdaq is not advantageous". Romcab Târgu Mureş forecasts a turnover 33% higher than last year (approximately 80 million Euros) and for 2014 the representatives of the company estimate a 38% increase compared to 2013.

Exports account for approximately 50% of the turnover of the company, which is currently working at maximum capacity.

Zoltan Prosszer told us that there is no major difference between the profit it makes from exports and the one that comes from the local market: "The product that we sell is cheap, the added value is low, the profit rates that we work with are somewhere between 15 ands 25%. As a result, we can't afford to give out major discounts to enter the markets. Essentially, the productivity is very high, and the costs need to be very low: wages - 3-4%, energy - 1.5%, transport - 1.5-2%. The highest expenses are the financial ones (4-5%), which can't be allowed to increase much more, because if that were to happen, we'd be driven out of the market".

The prices of Romcab products are tightly correlated to the quotation of metals on the international stock markets.

The director of the company considers that the exploitation of a mine for copper in Romania would be necessary, and a potential privatization of Cuprumin (which would lead to a reactivation of the Romanian copper deposits) would be extremely beneficial for Romcab, because it would allow it to get raw materials faster. Romcab currently imports the raw materials through Romanian traders. Poland has an operator that is 10 times bigger than Romcab because of the benefit of having a copper mine that is easily accessible locally.

Romcab products are only shipped by road. The company's officials are saying that shipping by railroad would reduce the costs, but it would make money unavailable for a longer period of time. "Given the volatility of the price, shipping by train could stop being profitable between the time of the departure and the time of arrival. We watch costs very carefully. One can't afford to overshoot costs. The merchandise needs to arrive quickly, to be delivered on time, for the money to be collected as quickly as possible", said Zoltan Prosszer.

Sadalbari SRL Târgu Mureş owns 69% of Romcab, Morgan Stanley owns 22% and other shareholders own about 9%. Former minister of Finance Sebastian Vlădescu is the chairman of the Board of Directors, and Zoltan Prosszer is the administrator.

The company owns two plants, one in Târgu Mureş, where the administrative center is also located - on a plot of land of 43,000 square meters (30,000 built square meters) and one in Acăţari, near Târgu Mureş (a plot of land of 100,000 square meters and 12,000 built square meters). In terms of output, the two factories, which employ 360-400 employees, have the same capacity.

• Investments using European funds and money borrowed from EximBank

The investment in the plant of Acăţari was developed through a project co-financed through the European Regional Development Fund, and the financing was provided by EximBank. The value of the project was 14 million Euros and 3 more million Euros in additional expenses. The grant was 5 million Euros. Traian Halalai, the president of EximBank, said: "For Eximbank, the cooperation with Romcab has a special meaning because it has allowed us to support a company that has demonstrated its ability to generate ideas that affect its activity, as well as extend horizontally, by creating new jobs and stimulating the activity of other companies which are part of the economic chain. By offering a new mix of lending products of about 200 million lei, we have successfully contributed not just to the development of the company and of the area, but also to attracting European grants. We are in talks to extend the cooperation and the exposure to this company and we are hoping that soon we will announce the steps forward taken in our cooperation. We are trying to have in our portfolio as many partnerships of this kind as possible, that would generate a win-win relationship with the business sector and I believe we have achieved spectacular progress in that regard".

ROMCAB is one of the biggest makers of cables and electrical conductors in Romania and manufactures three major groups of products: conductors, cablings, power cords.