Oltchim to layoff 1,025 employees

• The plant has temporarily restricted its operations, operating at 30% capacity

The management of "Oltchim" Râmnicu Vâlcea (symbol:OLT) has decided to temporarily reduce the operations of the plant and to send 1,025 of the company"s employees into technical unemployment, according to a communiqué sent yesterday to the Bucharest Stock Exchange.

The directors of the plant said that the temporary reduction in activity was determined by economic factors, and also said that in August, the company has been operating at 30%il0[, due to the fact that "it is impossible to finance working capital".

Constantin Roibu, the president of the Board of Directors, said that the company would need a working capital of 75 million Euros a month to return to its working capacity of Q1 2011, of 54%.

"The disagreements between Oltchim SA and its minority shareholder PCC SE are the reason why there isn"t enough working capital for the operation of the company", Mr. Roibu added.

The 1,025 employees will enter into technical unemployment between today and August 31st.

The company has been trying to raise money for working capital by taking out bank loans. On August 29th, "Oltchim" will summon its shareholders to decide, among other things, on the proposal to borrow 150 million Euros to provide the working capital that Oltchim needs to operate at full capacity. Also on the agenda of the General Shareholder Meeting is the approval of additional guarantees of 72 million lei that BCR is demanding for a loan of 72 million Euros.

"Oltchim" has succeeded in significantly lowering its losses, from 52.8 million lei in Q1 2010, to 2.64 million lei in Q1 2011, after the company stopped working at a higher capacity, according to its managers. The company"s turnover almost doubled in Q1 2011, to 464.6 million lei, and output sold rose from 231.7 million lei, to 445 million lei.

Oltchim has a share capital of 34 million lei, divided into shares with a face value of 0.1 lei. The Ministry of the Economy controls 54% of the company, and PCC SE and Carlson Ventures own 31.8% of the company acting in concert.

PCC SE has filed a complaint with the European Commission on a possible state aid for Oltchim, by way of a 140 million Euros debt to equity swap. The European Commission opened an investigation on this matter, two years ago.