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Copper giant hits recovery path

The huge factory chimneys at the central Slovak copper wire monolith Kovohuty Krompachy have begun belching fumes again as a new company, Kovohuty a.s., restarted production at the plant after lying fallow for more than a year on October 27. The reopening of operations at Krompachy will breathe life back into a region which officials say had become "a valley of hunger".
Kovohuty AS has already rehired 140 of the former 1,000 employees from what was once the biggest company in the region, and intends to bring back a further 310 workers before the end of the year.


The haze hanging over Slovakia's 'Valley of Hunger' signals the resurrection of Kovohuty Krompachy.
photo: TASR

The huge factory chimneys at the central Slovak copper wire monolith Kovohuty Krompachy have begun belching fumes again as a new company, Kovohuty a.s., restarted production at the plant after lying fallow for more than a year on October 27. The reopening of operations at Krompachy will breathe life back into a region which officials say had become "a valley of hunger".

Kovohuty AS has already rehired 140 of the former 1,000 employees from what was once the biggest company in the region, and intends to bring back a further 310 workers before the end of the year.

Kovohuty Krompachy ceased production in the first half of last year as falling world copper prices brought the company to bankruptcy, forcing mass lay-offs. However, the firm's plant and equipment have been rented by Kovohuty a.s.'s creditors pending the closure of bankruptcy proceedings. Kovohuty a.s. is looking to take the remaining viable assets of the company after it the court case is wound up.

Krompachy's mayor, Jozef Fajgel, said that the restarting of production at the plant was vital to a region which has an unemployment rate of more than 30%. "This region had become a valley of hunger with no viable domestic producer. Companies like Kovohuty are this region's bread and butter. They can boost a region's economy and cut its high unemployment," the mayor said.

Kovohuty a.s. has invested 500 million crowns ($10 million) in restarting its plant, putting the finances into material, the repairing of old production lines and running the facility. An additional investment of 350 million crowns ($6.1 million) will have to be made in order to restore full operation at the factory.

Analysts have said the plant's resurrection is a positive step for the region, but does not signify a wider return to health for Slovakia's depressed heavy-manufacturing industry because of the very diversity of problems faced by companies operating in the sector. "The industry is still stagnant, and this single positive example doesn't mean much for its overall revival," said Michal Kustra, analyst with Tatra banka.

Kovohuty a.s. representatives have said they are aiming to restore the Krompachy plant to its former glory, outlining plans to stabilise production, re-establish itself on markets and, crucially, to find a foreign investor to help the company catch up with similar producers in central Europe. "The future expansion of our production, which can only be managed by building a line for procesing copper concentrates, is conditional on the entrance of a strong investor to Kovohuty a.s.," said company director Zoltán Berghauer.

Kustra supported the view, saying that the only possible way for Kovohuty to eventually sell a stake off to a foreign buyer was to first revitalise its operations through domestic financing. "I think it's good that domestic entities are now operating the company because they are the ones able to bring it to a point where it will be interesting and acceptable for foreign investors. This is the future for most Slovak companies," Kustra said.

Kovohuty Krompachy stood as the monopoly copper wire producer in the former Czechoslovakia, but in 1996, the government of Vladimír Mečiar privatised a 46% stake in the state-owned company to the firm Copper Krompachy for 34 million crowns ($680,000). The company's book value was 323 million crowns ($6.4 million). Copper Krompachy later became the majority owner, holding 97% of the company's shares.

Following the firm's collapse in the early part of last year, creditors, under existing bankruptcy legislation, rented the facilities and equipment to a consortium of domestic investors who formed Kovohuty a.s., the majority owner of which is Sitno Holding represented by former Economy Minister Ľudovít Černák. Černák resigned from his post last year amid allegations of corruption.

Kovohuty a.s.'s production director Ján Šimko said that "no foreign investor will enter the company unless the ownership structure is clear," referring to the on-going bankruptcy process and Kovohuty's potential acquisition of the viable assets of Kovohuty Krompachy.

He added, however, that any investors could benefit by making a quick move as copper prices had returned to their former levels. "Now is the right time for Kovohuty to hit the markets again," Šimko said.

The Kovohuty region is also set to receive an employment boost from the entry of a foreign firm into electronics firm SEZ (Slovenské elektrotechnické závody), a company to which Kovohuty Krompachy had been a major supplier.

Japanese electronics producer Matsushita Electric will soon open a new facility in SEZ's current production halls, employing 1,200 people.

Mayor Fajgel praised the latest investment into the region, saying: "This is all very positive news and will definitely be reflected in the level of unemployment in the region soon. People here deserve this." He added: "Co-operation between domestic and foreign businesses can help this region to become viable and prosperous again."

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