Could Poland fertilizer agreement signal a merger?

Zaklady Azotowe Pulawy (ZAP), Poland’s largest fertilizer producer, and Zaklady Chemiczne Police (ZChP), the country’s second-largest fertilizer producer, today signed a business cooperation agreement.

With the two groups in the midst of privatisation, I wonder if potential purchasers might look to merge the two groups, with all the consequent savings in overheads. ZAP produces nitrogen fertilizer, melamine and caprolactam, while ZChP produces nitrogen phosphorus potassium (NPK) fertilizer and titanium dioxide (TiO2) so there are obvious synergies in terms of prduct portfolio.

Any moves entailing job cuts or plant closures will attract fierce opposition in Poland, where social considerations have stymied previous attempts to rationalise outdated operations.

According to ICIS news, the agreement would initially address possible joint activities in optimising production processes, investing in and repairing fertilizer and ammonia units, and pushing ahead with environmental protection and energy initiatives, the companies said.

It replaced a previous cooperation agreement drawn up in 2008, which was abandoned because of the economic downturn.

New gas agreement gives hope to Poland chemical privatisation

Good news for Poland's chemical industry this week as a long term gas supply agreement is finally signed off, guaranteeing feedstocks for many chemical firms there. Lack of an agreement could have threatened the privatisation of the country's second-largest Polish fertilizer producer Zaklady Chemiczne Police (ZChP), and others currently under offer.

According to ICIS news, Under the ‘Yamal contract’, Gazprom has agreed to increase annual gas supplies to Poland to a maximum of 10.2bn cubic meters a year. Without it, Poland, which imports about two-thirds of its gas from Russia, would from this year lack 2.5bn cubic metres. The gas deal still needs to be approved by Warsaw, but the treasury ministry said the government stood ready to sign it.

Image credit http://www.sxc.hu/photo/579069

Central and Eastern Europe chemicals industry call for ideas

I'm currently planning a special issue of ICIS Chemical Business magazine focussed on the central and eastern Europe and Russian chemicals industry. Please send me any good ideas for articles to explore this fascinating region.
I'm thinking about CEO interviews, Poland privatisation update, BorsodChem, Spolchemie, Russian chemical projects update and much more.

Billionaire Kulczyk bids for Poland fertilizer firms

Poland's billionaire businessman, Jan Kulczyk, is in talks to acquire the country’s two largest fertilizer firms, a source at the ministry told ICIS news this week.

The entrepreneur, owner of Warsaw-based Kulczyk Holding and international investment house Kulczyk Investments has had behind-the-scenes talks with senior Polish treasury ministry officials, said the source.

The report says he is looking at acquiring Poland’s largest nitrogen fertilizer producer, Zaklady Azotowe Pulawy (ZAP), and the country’s largest nitrogen phosphorus potassium (NPK) fertilizer producer, Zaklady Chemiczne Police (ZChP).

A quick search shows that Kulczyk may be trying to build a large fertilizer manufacturing base. According to Ukranian News, he is also interested in taking part on the privatisation of the Odessa Portside Factory, a huge ammonia producer.

Kulczyk Investments already owns Poland's solvent producer, POCH, located at Gliwice.

Poland chemical privatisation faces more delays

It's perhaps not surprising that bidders are to be given extra time to submit binding offers for the package of Ciech, fertilizer, caprolactam and polymer producer Zaklady Azotowe Tarnow (ZAT) and nitrogen fertilizer, plastics and oxo alcohols producer Zaklady Azotowe Kedzierzyn (ZAK).

Poland's chemical industry privatisation, Polish state company restructuring agency Nafta Polska revealed the news on Thursday, as reported on ICIS news. The move was necessary, the agency said, because some of the six shortlisted potential buyers had requested more time to examine the financial condition and investment strategy of each of the firms in the package.

None of these companies is in particularly good shape financially and all will require further restructuring to bring them up to world-class standards. Central Eastern Europe is being hit really hard by the economic downturn too with financial instability at state level still a real concern.

Poland chemical privatisation moves a step closer

The boards of Ciech, Tarnów and Kędzierzyn are to present the financial situation and investment strategies of their companies to potential investors from the short-list this week, according to Adam Leszkiewicz, deputy treasury minister, told the Polish News Agency (PAP), quoted in Polish Market Online.
‘Investors interested in the privatisation of the first group of chemical plants have scheduled meetings this week with the boards of Ciech, Tarnów and Kędzierzyn plants, which will present their financial situation and strategy’ Leszkiewicz said.

The six short-listed companies are: an American private equity investment fund Bain Capital Ltd; a consortium of a British investment fund Cinven Ltd and an international advisory company Kolaja & Partners Ltd; private fund NQI (National Qatar Industries Company), specialized in oil, gas and petrochemical investments; German capital group PCC SE; Lithuanian UAB Achema Group and capital group I Fund Mistral SA.

The Polish Treasury would prefer to sell all three companies to one investor by the end of 2009. However, the companies may be sold separately.

Nafta Polska, a state-owned company set up to handle the privatisation
The companies are due to be privatized by the end of this year, but this is unlikely! The economic climate and collapsed demand in central and eastern Europe may jeopardise this.

(Image of Ciech HQ courtesy of Wikipedia)

Bidders shortlisted for Poland chemical privatisation

Poland's privatisation agency, Nafta Polska, has unveiled its shortlist for the chemical sell off it is planning.

According to ICIS news, US-based private equity firm Bain Capital; London-based private equity firm Cinven in a consortium with Polish human resource and interim management services company Kolaja & Partners; German chemical company Petro Carbo Chem (PCC); National Qatar Industries Company; Lithuanian chemical, logistics and cargo group UAB Achema; and Polish investment fund Mistral have been shortlisted.

The government is selling off Ciech group and a second sector comprising fertilizer groups Zaklady Azotowe Pulawy (ZAP) and Zaklady Chemiczne Police (ZChP).

It is interesting to note that no large multinationals have chosen to participate in this sell-off. Poland is a huge and potentially fast-growing market. Can these companies be in such bad shape that they are of no interest? Or are they just too small to be worth the bother?

Poland's construction chemical market falls

Bad news for construction chemical manufacturers serving the Poland according to a new report. Annual declines in demand of 5% are forecast for 2010 and 2011. The only surprise here here is that the falls are not more severe.

"After an excellent 2004-2008, a much slower development of the Polish economy as well as drying up financial sources for buildings projects, especially in the residential sector, will give a rise to a certain correction in the Polish construction chemicals market between 2009 and 2011. The report estimates that in 2009-2011 the market’s average annual rate of change, measured in sales value, will equal -5%. The market will report the steepest declines in 2010.

The condition of the construction chemicals market could undoubtedly be enhanced by investments in new public utilities. The report suggests that constructing and further expanding schools, university campuses, libraries, sports halls, swimming pools, hospitals, museums or civil administration offices will be the most dynamically developing arm of the non-residential sector and, to a large extent, will compensate for the loss in the property developing residential construction."

Picture attribution http://www.flickr.com/photos/17989497@N00/

Poland runs out of gas for chemicals?

Poland may have to cut chemical production if supplies of natural gas run out later this year, according to a Reuter's report. This could have a big impact on chemical producers such as Police, Pulawy and Anwil which were affected last year during the Ukraine gas dispute.

"Poland's gas monopoly PGNiG estimates it will be short 0.5 billion cubic metres of gas in the fourth quarter and may be forced to reduce supplies to large industrial clients, PGNiG deputy head was quoted as saying on Monday.

"We estimate the fourth quarter deficit will reach 0.5 billion cubic metres. We cannot rule out that deliveries to our industrial clients will be reduced," Dudzinski told Puls Biznesu daily.

Poland, which was not receiving all the contracted gas from Russia for nearly six months this year, is currently in talks with Russia to increase gas supplies to make up for shortages in 2009 in 2010.

Radoslaw Dudzinski added the monopoly might be short 2.3 billion cubic metres next year, should the government fail to amend a deal with Russia and increase natural gas supplies.

During the gas row between Russia and Ukraine in January, PGNiG was forced to reduce supplies to its biggest clients including chemical makers Police PICE.WA, Pulawy PULW.WA and Anwil. (Writing by Patryk Wasilewski; Editing by Kim Coghill)"

Poland chemical privatisation deadline passes

This week the deadline for preliminary bids in Poland's chemical privatisation plan passed.

According to ICIS news, only Germany's Petro Carbo Chem (PCC) has publicly declared that it is a confirmed bidder for the package, which comprises Ciech, Zaklady Azotowe Tarnow (ZAT) and Zaklady Azotowe Kedzierzyn (ZAK).

The blog wonders whether the whole thing may fail if bids do not match up to the valuations privatisation agency, Nafta Polska, have in mind.

Poland chemical industry privatisation plans in question

Poland's chemical industry has been trying for years to privatise parts of its chemical industry. The blog has been following these developments for nearly 10 years and there has been little progress.

Political inertia is caused by succesive governments altering or abandoning existing plans. And overstaffed, unmodernised factories have remained unreformed as strong unions and succesive govenrments have failed to tackle the issue.

Now, according to Poland's Gazeta, the latest set of plans are under threat. It says: "Mr Grad's privatisation plan was to be discussed by the cabinet today. But it won't be. 'The Council of Ministers' Permanent Committee has asked for legal opinions concerning the planned sale of certain companies,' Treasury spokesperson Maciej Wewiór told Gazeta last night."

ICIS news says that last week, Poland said it was has expanded its privatisation programme, with major stakes in fertilizer, titanium dioxide (TiO2) and biofuel producers a key element.

"A minority stake in the second-largest Polish refiner and biofuels producer, Grupa Lotos, was among the assets newly announced as available to investors.

The treasury ministry also reiterated its determination to see Poland’s largest fertilizer maker, Zaklady Azotowe Pulawy (ZAP), as well as the country’s second-largest fertilizer producer, Zaklady Chemiczne Police (ZChP), sold off during next year.

Initial bids for the flagship package of the process - Ciech, Zaklady Azotowe Kedzierzyn (ZAK) and Zaklady Azotowe Tarnow (ZAT) – need to be lodged by 10 September."

Poles consume fake drugs filled with antifreeze

According to the World Health Organization, quoted by the Warsaw Business Journal, Poles spend as much as zł.100 million ($30m) on fake medicines every year.

"The kinds of drugs that are most often copied are impotence medicines and anabolic supplements, diet pills, and psychoactive drugs.

Despite the fact that many of the “fillers” in these drugs are safe placebos, inducing sugar, there are also some which list chemicals such as anti-freeze solutions and wood polish among their ingredients. "


photo credit http://www.flickr.com/photos/carlos/1488488588/

Crisis hit Zaklady Chemiczne Police loses CEO

Poland’s beleagurered second-largest fertilizer producer, Zaklady Chemiczne Police (ZChP) has lost its CEO. According to Reuters Ryszard Siwiec, stepped down last Thursday citing personal reasons.

"Siwiec is the second top official to resign after Police, hit by bad currency bets, high expenses and falling demand, reported losses of $151 million in the last two quarters. The head of the supervisory board Wojciech Drozdz stepped down on Monday."

In June, ICIS news reported that Police was in the process of appointing three new directors to work with the CEO in implementing a crisis-period strategy.

Of the previous four-member management board only CEO Ryszard Siwiec was still in place following the emergence of liquidity difficulties at the company.

Picture credit http://www.biznes.stetinum.pl/pl/wiadomosci/szczecinskie_firmy/Police_bez_prezesa_Ryszarda_Siwca

PKN Orlen moves a step closer to feedstock independence

Good news for Poland's PKN Orlen this week. All oil producers in the country are reliant on Russian crude; a vestige of the Soviet era.

Now the country's oil group, Grupa Lotos, has signed a letter of intend with the State Oil Company of Azerbaijan (SOCAR) to co-operate on oil production.

A pipeline which currently runs from Odessa on Ukraine's Black Sea coast to Brody in southern Poland could be extended to Plock, where Orlen is based.


Poland's second-biggest oil concern Grupa Lotos signed a letter of intent with the State Oil Company of Azerbaijan (SOCAR) on cooperation concerning technical and economic analyses of potential business projects in Azerbaijan , Poland and other countries, Lotos announced.

According to gowarsaw.eu, "The companies will set up an experts group to probe into potential cooperation fields. Grupa Lotos is a key player on both wholesale and retail fuel markets in Poland and is carrying out upstream operations on the Baltic Sea through its subsidiary Petrobaltic; it also holds stakes in several oil concessions the Norwegian Continental Shelf."

Stormy meeting for Unipetrol?

Unipetrol, part of Poland's PKN Orlen, has had a tough time of it in recent months. Political interference at head office in Poland means every time there is a change of government in Poland, a new set of managers are appointed at Orlen.

This contributed to the resignation of Unipetrol's CEO, Francois Vleugels, earlier this year. He had been busy modernising the group, introducing current best practice in business planning and logistics.

I met Vleugels at EPCA last year and was impressed with the energy he was giving to bringing Unipetrol up to scratch.

Q1 results were pretty disastrous for the group which posted a net loss of koruna (Kc)190.3m ($9.6m/€7m) in the first quarter of the year as sales sharply declined. Unipetrol reversed the K389.5m profits it made in January-March 2008. Revenue for the first three months of this year declined 34.4% year on year to Kc14.5bn.

June 24 Unipetrol holds its annual shareholders' meeting - should be interesting. Then on July 21 Unipetrol is due to present a trading statement for the second quarter.

Krahn Chemie signs distribution deal

Germany, Hamburg-based distributor Krahn Chemie is to distribute rubber chemical products for NOCIL, which was spun out of Monsanto, according to Chemie.de Krahn Chemie operates across Europe, including Hungary, Poland and the former Yugoslavia region.

"In the past years, NOCIL has proven to be a very reliable supplier to the rubber industry", says Helmut Waibel - Business Segment Manager Rubber Processing Industry. "The sales partnership with Krahn Chemie has provided a basis for the company to enter the European market."

Interestingly, NOCIL Rubber Chemicals' website is listed as "under construction"!

PKN Orlen may breach loan covenants

PKN Orlen is in trouble again. Constant changes of leadership mean the group has real trouble following a set strategy. Political interference is the key probelm. A change of government means a change at the top for Orlen.

According to ICIS news, quoting ING Bank, Orlen

"could improve its financial health by selling its strategic oil inventories to the Polish state and earning capital on a sale of its 24.4% stake in Polish mobile operator Polkomtel telecom. However, both transactions were unlikely to occur this year, meaning “2009-10 is likely to be challenging for Orlen operationally, and we expect the outlook to worsen", the bank said."

Bankruptcies to soar in Eastern Europe, but not as bad as the West!

According to today's ft.com, there will be a huge rise in corporate bankruptcies this year, up by 35% this year, "turning the world economy into a “burial ground” for businesses, according to a study by Euler Hermes, the credit insurer. In a study published on Thursday, the Paris-based unit of Allianz, says the rate of corporate collapses will reach “historic” highs in 2009 following a 27 per cent increase last year, under-lining the brutality of the economic crisis."

Interesting to note, though that the figure for Eastern Europe - 30% for Hungary, Poland and the Czech Republic - is much lower than the UK, Spain and Ireland which are looking at up to 40%.

This seems strange when we've heard so much about the parlous state of economies in CEE and shows just how bad things have got in the West. Should be good news for the chemical sector in CEE once the recovery kicks in.

What is this blog for?

Why this blog?

In my early days as a news reporter, central and eastern Europe plus Russia was part of my beat. I still have a keen interest in this region so it makes sense to have a way of gathering news together and commenting on it.

In the early 2000's when I started looking at this region there was a lot of talk of Russians trying to gain a foothold in its chemical industry. There was talk of secretive Russian investors building stakes in Hungary's BorsodChem, and of Russian bids in the various privatisations going on in the region. They have not been very successful, thanks mainly I think to the mistrust felt by many in CEE. History weighs heavy!

There was talk of consolidation. Would Poland's PKN Orlen tie up with Hungary's MOL to create a pan-regional player? This never happened and Austrian OMV's bid to do the same through a merger with MOL seems to have failed miserably.

Indeed the region was once seen as a major growth focus in chemicals. The industry has now overlooked it, so preoccupied is it with China and India.

But there is a lot of potential here, especially with large poulations in Russia and Poland and above average GDP growth. Surviving the downturn is now the key priority here as elsewhere. I hope to bring you more chemical-industry related news and insight into this fascinating area.