TISE coming to Romania, but not for "Oltchim"

Do you remember the story of the boy who cried wolf too many times? This is kind of what the visit of the management of TISE in Romania looks like, which is being awaited since the autumn of 2012. Several government officials have been saying that TISE is expected to come to Romania, but the event hasn't happened. Well this time, even though it seems unlikely, TISE is actually getting ready for a visit.

Prime Minister is perfecting the details of a meeting between himself and the management of Russian giant TISE, sources close to the situation told us. The management of TISE is expected at the Victoria Palace in the coming days, our sources are also saying: "The prime minister is awaiting for an answer on the date of the visit, which is intended to be low-key. The management of TISE is not looking for a press event. Most likely, the government will issue a press release".

Even though many attribute the interest of TISE in Romania to the privatization of Oltchim (the Russian company submitted one preliminary offer one year ago, but did not participate in the final call for bids of autumn), it would seem that the Russians are no longer interested in acquiring Oltchim, according to the quoted sources.

TISE did want the plant of Vâlcea, but only bundled with the oil logistic of the Port of Constanţa (OIL Terminal), with Conpet, the Arpechim refinery and with the thermal and electric energy sources for Oltchim located in Râmnicu Vâlcea. However, according to our sources, the Government is reportedly not too excited in about selling Conpet and Oil Terminal, and TISE has no use for Oltchim on its own.

In November 2011, the Minister of the Economy at the time, Ion Ariton, received the mission of Russian company TISE, which at the time expressed interest in acquiring Oltchim. The Russian mission was led by the CEO of TISE, G. Galustyan.

• The investors' pilgrimage to Oltchim

Over the last month, about 20 companies interested in Oltchim came to visit the plant. Several sources from within the plant told us that most of them came and left because they were expecting to see and to buy for nothing a pile of scrap metal. Our sources claim that "the undependable investors" were surprised to find out that the production departments use modern technologies.

Of the investors that came in, about ten are serious about their intentions, and they are interested in getting access to the data chamber of Oltchim and have signed confidentiality agreements and letters of intent. Of those, the receivers received three offers for the financing of the plant, the quoted sources also said.

BURSA recently published an exclusive piece of news stating that Israeli investment fund "Fortissimo Capital" has submitted a call for tenders for the financing of Oltchim. The second serious offer comes from PCC (a significant majority shareholder of Oltchim, with a direct and indirect stake of nearly 33%). Also interested in Oltchim are SCR Grup, owned by Ştefan Vuza, Polish and Hungarian companies, as well as companies in Turkey.

• Still going through insolvency, the plant has pared its losses

Rominsolv and BDO yesterday announced that in May and June 2013, the operating losses of Oltchim are far lower than they were in the similar months of 2012. "For Q2 2013, Oltchim expects its operating losses to fall from 69 million lei to 50 million lei, even though the average level of use of its production capabilities is still lower than they were in the same period of 2012 - (17% in Q2 2013 and compared to 27% in Q2 2012). Compared to Q1 2013, Oltchim has improved both its level of use of its production capabilities, from an average of 8.4% to 17%, in Q2, as well as reduced its operating losses, from -117.7 million lei in Q1, to -50.3 million lei in Q2 2013", the quoted press release states.

In April 2013, the company has succeeded in reducing its expenses with commodities and raw materials by 78%, cutting other operating expenses by 77% and reducing staff expenses by 6%, as the planned staff reduction was not implemented in April (it will be done on June 14th, 2013).

The financial results have improved significantly, according to the company's receivers. The company reduced its interest expenses by 57%, and with the influence of the EUR/RON exchange rate in April it has come to seeing a profit out of the financial activity seen in April 2013 compared to the loss it had in April 2012.

Overall, in April 2013 the company had a loss of just 3.2 million lei, which is far lower than the total loss seen by the company in April 2012, of 25.6 million lei.

In April 2013 the turnover was 60% lower than in April 2012, due to the issues which the company is still having with financing working capital, which caused the rate of use of its production capabilities to fall to 15.3% in April 2013, compared to 31.6% in April 2012.

The receivers consider that despite these obstacles, the company has successfully managed to perform a turnaround and to offset the short-term operating shock, as the operating loss increased only 16% in April 2013, compared to April 2012. Out of the total operating loss of 17.9 million lei, the amortization (which is a non-monetary item) accounts for 9.7 million lei.

For the months of May and June 2013, the receivers predict that Oltchim will continue to increase the rate of use of its production capabilities, to an estimated 19.3% in June compared to 15.3% in April 2013.

The effects of the layoff of 28% of the number of employees performed in June will become visible starting in July 2013, with a direct influence on the decrease of the employee expenses.