PCC: "Oltchim Should Focus On Niche Products

• Wojciech Zaremba: "The 486 million investment in Arpechim will not bring the company to the same level as the competition"

Izabela Sîrbu

Representatives of the German-based group PCC SE, a significant shareholder in chemical plant Oltchim - Ramnicu Valcea (BSE ticker OLT), believe that the plant"s intention to invest 486 million EUR in expanding the production capacity of Arpechim would not ensure the company"s competitiveness on the domestic market. Oltchim is planning to expand the production capacity of Arpechim from 185,000 tonnes/year to 300,000 tonnes/year in the following two years.

"The minimum capacity required to be competitive on the market today is 400,000 tonnes/year. Petchim, the main competitor of Arpechim, based in Turkey, has a current capacity of 500,000 tonnes/year and is planning to expand to 850,000 tonnes/year in the following two years," said PCC SE Development Manager Wojciech Zaremba. In his opinion, Oltchim will spend nearly 500 million EUR only to continue to remain uncompetitive.

Zaremba is advocating a change of focus from mass market products, such as PVC, for which there is a strong competition, to niche products as Oltchim is not efficient enough for mass production, in his opinion. "Oltchim could achieve higher profitability if they focused particularly on niche products, such as the vinyl chloride monomer (VCM) and advanced oxo alcohols, which are specialized products made in smaller quantities in Europe," the PCC SE representative added.

In turn, Oltchim CEO Constantin Roibu said Zaremba did not have the background required in order to make such statements or any authorization from the Board of Directors. "The pyrolysis capacity is feasible, although it is not too large. This was proven by the studies made by specialized companies, not the studies of Mr. Zaremba", Roibu told BURSA while explaining that Arpechim could not be compared with Petchim, because Petchim was building a new installation, while Arpechim was retooling an existing one.

PCC SE is the leading minority shareholder in Oltchim with 12.89%. The Romanian Ministry of Economy is the majority shareholder with 53.26%.

• Zaremba: We are no longer interested in Arpechim

Wojciech Zaremba yesterday denied speculations that he was negotiating to take over Arpechim"s petrochemical operations from OMV-Petrom. "We had talks with Petrom in 2007 regarding a possible takeover of Arpechim. However, we stopped negotiations shortly afterwards. We are no longer interested in Arpechim," Zaremba said. He pointed out that, should Oltchim buy Arpechim via the Ministry of Economy, the European Commission could deem the transaction as a form of State aid.

The Ministry of Economy recently started negotiations with Petrom to buy the petrochemical operations of Arpechim on behalf of Oltchim. As part of the deal, the State is willing to pay Oltchim"s 35 million EUR debt to Arpechim. Zaremba believes that, if the Ministry of Economy wishes to buy Arpechim specially for Oltchim, "they should notify this form of State aid themselves and wait for the European Commission to announce the conditions for the deal to go through."

Oltchim closed last year with losses of 61.4 million EUR, two-fold more than in 2008, when the company lost 26.3 million EUR. However, the turnover increased by 11.2% to 530.5 million EUR. The plant is currently operating at 40% of their capacity, following Petrom"s decision to stop raw materials deliveries to Oltchim. Consequently, Oltchim reported tremendous losses in the final months of 2008 and the first quarter of 2009. Specifically, the company announced operating losses of more than 106 million RON for the Q4, 2008 and a net loss of 28 million RON for Q1, 2009, up eight times from the corresponding period of 2008.