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Retail branch set to spread throughout region

Despite spending 25 billion crowns on the upgrading of its retail marketing operations and refinery, and another $530 million investment in modernising its technology, the Slovnaft refinery has long been seen as having a very weak retail network outside Slovakia. The firm's new minoroty owner, Hungary's MOL, has said it believes a considerable investment will be needed to beef up the Slovak company's retail arm
Janos Csak, Chairman of the Board of Directors at MOL, said that Slovnaft's retail arm had been singled out by his firm for development. "We aren't contemplating any reduction in capacities and we don't think that any major investment is needed in technology, but in retail, it will," said Csak following a press conference on April 3 to announce MOL's purchase of a 36% stake in Slovnaft (see lead story, page 1).


MOL's acquisition of a share in Slovnaft is expected to boost the Slovak firm's retail operations across regional borders.
photo: TASR

Despite spending 25 billion crowns on the upgrading of its retail marketing operations and refinery, and another $530 million investment in modernising its technology, the Slovnaft refinery has long been seen as having a very weak retail network outside Slovakia. The firm's new minoroty owner, Hungary's MOL, has said it believes a considerable investment will be needed to beef up the Slovak company's retail arm

Janos Csak, Chairman of the Board of Directors at MOL, said that Slovnaft's retail arm had been singled out by his firm for development. "We aren't contemplating any reduction in capacities and we don't think that any major investment is needed in technology, but in retail, it will," said Csak following a press conference on April 3 to announce MOL's purchase of a 36% stake in Slovnaft (see lead story, page 1). Csak pointed out that one of the MOL appointees on the new Slovnaft board would be a Head of Retail Operations.

Analysts agreed that MOL would have to make a concerted effort to raise the retail arm of Slovnaft if it was to meet its target of becoming a major European player.

"If they [MOL] are looking to build a network, this is only the first step," said Miloš Božek of J&T Securities in Bratislava. The analyst explained that while Slovnaft was a success in its own country in terms of retailing, holding a 50% share of the service stations in Slovakia as of June 1 last year, only 45 of its 360 total stations are outside Slovakia. "There is still a long way to go," Božek added.

Combined, MOL and Slovnaft will have a 38% share of the retail market in Slovakia and a 36% share in Hungary. The new combine will also have a 3% share in Romania and 2% in the Czech Republic.

Poland, possibly with the involvement of PKN, the Polish bidder in the Slovnaft tender, was tipped by analysts as the most likely area for expansion of the retail network, with the saturated Czech market playing second fiddle in MOL's plans of a regional conglomerate.

"The Polish market is much more underdeveloped than the already full Czech one," explained Dušan Meszároš, an energy sector analyst for Commerzbank Capital Markets in Prague. According to Meszároš, the southern Polish region presents the best growth target area for the newly-linked companies.

The new firm will keep the Slovnaft brand name, however, according to current Slovnaft President Slavomír Hatina. The Slovnaft CEO explained that the cost of developing an entirely new brand negated the idea. "The Slovnaft brand is well-known and will stay," he said. "Also, MOL is aware that launching a new brand is a costly exercise," he added.

He also allayed fears that the acquisition would spell a rise in the price of petrol and diesel at pumps. "There will be no impact on the price of fuel in Slovakia. That depends on the global price of oil and the Slovak economy."

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