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CAPITAL MARKET

Harmanecké Papierne ownership changes overshadow thin trading

The Bratislava Stock Exchange floor market retained its somnolent mood during the past two weeks, with only moderate changes in share prices. Trading volumes were thin and market statistics were inflated by the National Property Fund's (FNM) privatization transfers and OTC trades. VSŽ was the most liquid share and increasing demand pushed its price up to 649 Sk. Slovnaft firmed to 860 Sk and Slovakofarma to 3,980 Sk, however, both on low volumes. 51 percent of chemical producer NCHZ in Nováky was transferred, after a long dispute ending with a court ruling, by the FNM to Prague-based company Inekon. The purchase price was 1,496 Sk per share. The other 49 percent was transferred to a Slovak company PT Nova at a price of 240 Sk per share. VÚB dominated the OTC market, where several large stakes (up to 9.5% of shareholders' equity) in the commercial bank were transferred at price between 1,711 Sk and 1,901 Sk. These transfers are likely to be used to strengthen the VÚB present management's position before the FNM will offer its 50.8 percent stake for sale.

The Bratislava Stock Exchange floor market retained its somnolent mood during the past two weeks, with only moderate changes in share prices. Trading volumes were thin and market statistics were inflated by the National Property Fund's (FNM) privatization transfers and OTC trades. VSŽ was the most liquid share and increasing demand pushed its price up to 649 Sk. Slovnaft firmed to 860 Sk and Slovakofarma to 3,980 Sk, however, both on low volumes. 51 percent of chemical producer NCHZ in Nováky was transferred, after a long dispute ending with a court ruling, by the FNM to Prague-based company Inekon. The purchase price was 1,496 Sk per share. The other 49 percent was transferred to a Slovak company PT Nova at a price of 240 Sk per share. VÚB dominated the OTC market, where several large stakes (up to 9.5% of shareholders' equity) in the commercial bank were transferred at price between 1,711 Sk and 1,901 Sk. These transfers are likely to be used to strengthen the VÚB present management's position before the FNM will offer its 50.8 percent stake for sale.

Parliament passed an amendment to the Privatization Act returning responsibility for direct sales of state assets from the FNM back to the cabinet. The amendment aligned privatization law with the Constitutional Court's ruling that the government (and not the FNM) is responsible for direct sales of state assets. However, the amendment does not apply to sales of stakes in joint stock companies from the FNM portfolio. These have to be approved by the FNM Presidium. The portfolio includes stakes in commercial banks VÚB (50.8%) and IRB (35%). The sale of these stakes has been disputed since February 1996.

ZSNP, the aluminum producer, posted a 2.3 million Sk ($69,000) loss on sales of 11.4 billion Sk ($341 million) in 1996. Sales were 36 percent higher than in 1995. The loss was caused by the company's heavy debt burden and by a 11 million Sk loss in its subsidiary Sandrik Dolné Hámre (ZSNP owns a 67% stake). A restructuring program has already been started in Sandrik. ZSNP is forecasting a pre-tax profit of 506 million Sk ($15m) for 1997, 80 percent of which should be produced by ZSNP's Slovalco subsidiary. ZSNP will continue a development program with its Norwegian strategic partner Hydroaluminum, as well as programs for melting of auto scrap, geothermal energy utilization, and a new alloy plant.

The Slovnaft refinery made a pre-tax profit of 1.45 billion Sk ($43.4 million) for the first 5 months of this year. Slovnaft's sales were 16.3 billion Sk ($488 million), 37 percent more than for the same period of 1996. 51.3 percent of its output was exported, with the Czech Republic (exports worth 3.14 billion Sk - $94 million) being Slovnaft's prime foreign market. We expect that Slovnaft's net profit for this year will be 2-2.1 billion Sk ($59-62 million). The low price of crude oil should offset lower-than-expected sales due to Czech import deposits and a domestic increase in fuel excise tax.

Gas storage company Nafta Gbely and Bank Austria signed a $10 million loan agreement. The loan matures in 2000 and bears a interest rate of LIBOR plus "up to" 100 bps, according to a Nafta spokesman. Given Nafta's plans to build new underground gas storage facilities, this loan can be viewed as a step to polish the international image of the company in order to be able to obtain more loans from foreign banks in the near future.

Paper tissue producer Harmanecké Papierne (HP), underwent significant ownership restructuring. Of the original shareholders, only VÚB and VÚB Kupón investment fund retained their respective stakes of 17.35 and 9.55 percent. Slovenská Poisťovňa has sold its approximately 30-percent stake to O.K.L. Slovenská Ľupča, and broker Kapitál Košice has acquired an additional 11 percent on behalf of SCP Ružomberok's (a paper mill) owners. O.K.L. and Kapitál were represented at the recent AGM by a common proxy, who made several suggestions for changes to the company's statutes. Vladimir Poór, Trnava regional HZDS chief and the leader of the so-called Trnava privatization group (with influence in Nafta Gbely, pharmaceutical industry, VTV, and AG Bank) was appointed a member of the Supervisory Board. Another new appointee was Juraj Kamaras, a representative of one out of two powerful business groups in Košice which has a significant influence in SCP Ružomberok and has co-operated with the Trnava group. Other new board members are M. Filo (the Board of Directors' chairman at Eco-Invest Zvolen, the owner of 67% stake in SCP Ružomberok), Ján Gabriel, the VÚB president and Ivan Kino, the Slovenská Sporiteľňa president. The move marks the most recent stage of Slovak pulp and paper industries' integration. Last year, HP exported 60 percent of its output and invested nearly 110 million Sk. In 1996, its net profit was 26.8 million Sk ($0.8 million) on sales of 1.1 billion Sk ($32.7 million). This year, the company is forecasting a marginally improved sales and profits.


Prepared by ING Bank N.V., Bratislava branch in cooperation with ING Baring Securities (Slovakia), o.c.p.,a.s.

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