Inside Chemolak Smolenice .Courtesy of Chemolak
Around Smolenice, a quaint town in the middle of the Small Carpathian mountain range, natural resources have been used to make chemicals since 1883, first for manufacturing products based on dry wood distillation, then for paints and varnishes. Industrial development over the years has caused the product mix to grow wider, with synthetic and latex coating paints replacing the original products based on natural raw materials.
Today, making all this possible is Chemolak Smolenice, one of the biggest producers of painting coats in Europe. Chemolak also has one of the most sophisticated production processes in Slovakia, according to Pavol Serina, the company's financial director.
Chemolak supplies around 75 percent of domestic demand, producing 700 different kinds of products in about 1,320 assortment groups. Last year, coating paints made up 62.1 percent of the company's production, while diluters accounted for 19.5 percent ,with the rest consisting of varnishes, synthetic resins and glue.
About 56 percent of the company's sales are absorbed by the domestic market, while 34 percent are made in the Czech Republic. Sales are supported in both Slovakia and the Czech Republic by daughter companies like Triton, s.r.o. Bratislava (50.5-percent stake), Chemolak Moravia in Zlín and Chemolak Bohemia in Liberec (51 percent stake in both).
Business eastward
However, with the introduction by both countries of so-called economic packages that featured several protectionist measures including import duties, Chemolak's exports to its western neighbor have been seriously hampered. As a result, the company decided to look for customers elsewhere, mainly in the east.
"Our main focus now is to Eastern European markets," Serina said. "We recently opened a subsidiary in the Ukraine [called Chemolak Mukatchevo] and in Zagreb.Ukraine is one of our particular goals. The demand there is not yet satisfied and we are able to state our prices and payment conditions," he added. Chemolak's exports have shown surprising growth ever since the new eastern markets were entered. The amount of sales abroad for the first three quarters of 1997 is already 5 percent higher than for the same period last year.
But Serina mentioned another, if somewhat surprising, advantage of eastern markets. "For example, in Ukraine customers pay straight up at the time of shipment. In Uzbekistan they are even willing to give pre-payments," he said.
Due to painful experiences, payment discipline is very important to Chemolak's management. Recently, concerns grew over the amount of Chemolak's overdue receivables, caused by lack of payment by its customers. "The situation is completely under control now and there is no need to make a fuss," Serina said. "We fight bad receivables in many ways, using commercial lawyers, personal visits, creating reserves and, above all, we use factoring services when invoicing our biggest customers."
Factoring is a common way to improve a company's cash flow by the sale of receivables to financial institutions.
No investor in view
Other financial figures also show that Chemolak is a quite stable, if not very fast moving, company. For the first nine months of 1997, Chemolak posted a pre-tax income of 111.6 million Sk on 1.38 billion Sk sales, increasing its production by 0.3 percent to 26,838 tons of painting materials.
Because of this stability, Chemolak's shares are among the best traded on the Bratislava Stock Exchange, causing the actual shareholders' structure to fluctuate constantly. At the end of August, nearly 30 percent of its shares were controlled by former Harvard investment funds, while another 25.8 percent pack was held by Interfin Group and 6.7 percent belonged to VÚB. Some analysts believe that the company is seeking a strategic investor, but both the company's and main shareholders' representatives denied these speculations.
"Nearly all investment has been financed from our own resources," Serina said. "This year it has been 135 million Sk, out of which at least 60 million were investments in the environment. We have changed the entire production into a closed system, preventing any unwanted vapors or leaks," he added.
The application for the ISO 14000 certificate, expected to be completed by the end of 1998, will also cost the company a lot of money. But the company stands strong. "If you look at Chemolak from the scope of the last five years, you have to see the development we have undergone," Serina said. "During those years we have invested almost 800 million Sk in new technology, the environment, trading activities, information systems and our employees."
Chemolak Smolenice at a Glance:
(figures in millions of Sk for 1H97)
Number of employees:840
Revenue:797,159
Pre-tax profit: 67,204
Fixed assets:708,585
Total assets:1,783
Equity: 866,991
Registered capital:501,620
