08/09/2019 | Press release | Distributed by Public on 08/09/2019 01:00
CIECH commences preparations to halt production in its Romanian soda factory from September 18th 2019. The direct reason for this decision is the termination of the existing contract for the supply of technological steam with CET Govora, CIECH's only available steam supplier in Romania. The new price proposed by the CET, which is 135% higher than it was in 2018, attenuates the profitability of CIECH Soda Romania's business operations. Advanced analyses of available scenarios are underway, including the possibility of acquiring a new, cost-effective source of steam in cooperation with external partners. Further decisions in this regard will be made towards the end of the year. The possible hibernation of the plant in Romania is not expected to affect the adjusted EBITDA result of the CIECH Group at over PLN 900 million for 2021, as projected in the Group's current strategy.
Technological steam is a raw material necessary for the production of soda, and its price makes a significant part of the plants' operating costs (in 2018 it was over 30% in the case of CIECH Soda Romania). CET Govora is in bankruptcy and it terminated the contract for the supply of technological steam under the present conditions on June 18th 2019. Simultaneously, it offered a new price of steam, 135% higher than in 2018 (including the cost of CO2 certificates), while at the same time limiting the supplies by approx. 20%.
The decision on the preparations for the halt of production of the Romanian factory until a reasonable, cost-effective source of steam is acquired, leaves many open possibilities. CIECH Soda Romania is still open to further negotiations with CET, however, it cannot accept yet another increase in the price of this raw material as it would mean a permanent loss of production profitability. The company is intensively reviewing the available options of solving the situation, including, among others, the ability to obtain steam from another cost-effective source.
In preparation for a long-term pause in production, CIECH is developing a broad severance package offer for its employees in Romania, including a voluntary leave program, outplacement program and proposals to move to other factories within the CIECH Group. Further decisions in regard to CSR's future will be made towards the end of the year.
'We are determined to develop the best solution in this situation, taking into account the interests of our shareholders, business partners, employees, and the local community. In recent years, we have made significant efforts to modernize and expand our factory in Romania. Now, we are conducting detailed analyses of possible scenarios. At the same time, I would like to emphasize the hibernation of the plant should not affect the achievement of the target set in the strategy for years 2019-2021, which amounts to over PLN 900 million EBITDA (adjusted)', says Dawid Jakubowicz, President of the Management Board of CIECH SA
Over the past dozen or so years, CIECH has been saving the Romanian plant from bankruptcy and made copious efforts to develop it. Between 2006-2018, the CIECH Group invested over EUR 100 million in Romania, thanks to which the production process was thoroughly modernized, and it extended the production capacity. As a result of the implemented investments, CIECH Soda Romania products are sent to Europe, Asia, or Africa among others.
The Romanian soda plant is one of four soda factories in the CIECH Group (the other three are located in Inowrocław, Janikowo, and Stassfurt in Germany). Apart from Romania, all plants have their own sources of technological steam. CIECH Soda Romania is the smallest soda company in the Group.
Mirosław Kuk, Press Spokesperson of the CIECH Group
[email protected], tel. +48 723 66 86 86
CIECH is an international, expanding chemical group, with a strong standing on European and global markets and with a stable strategic investor (Kulczyk Investments). The company exports its products to over 100 countries around the world, including soda ash, purified soda, salt, plant protection agents, epoxy and polyester resins, polyurethane foams, silicates, and glass packaging. CIECH manufactures products of the highest, world-class quality, which are further used to produce articles which are essential in the everyday life of people all over the world. At the same time, it combines a modern approach to business with the tradition of production which dates back to 1882. Since 2005, the company has been listed on the Warsaw Stock Exchange and, since 2016, on one of the largest stock exchanges in Europe: Börse Frankfurt. More information is available at www.ciechgroup.com