Mostar-based Aluminij, Bosnia's sole aluminium smelter, said it has decided to begin shutting down its production on June 17 as it can no longer survive in the existing market environment of lasting unvafourable international prices of electricity and primary aluminium.
The decision was adopted unanimously on June 6 by the company’s supervisory board upon a proposal of executive director Ivo Bradvica. It is based on Aluminij’s Jan-Apr financial statement, which showed the company has been rolling monthly losses of BAM 9.7mn (EUR 5mn) since the start of 2013.
“Operating under such conditions no longer makes sense,” Bradvica said in a statement on the company’s website.
The closure of Aluminij is going to have serious implications on the Bosnian economy since the company is the country’s biggest exporter and employer. Its annual exports reach EUR 150mn. It has 900 employees and engages many more workers and firms in its production and supply chains.
Bradvica said in the statement he sees the only way out of the situation in the complete turnaround in the attitude of the governments of Bosnia’s Federation and of Croatia (both owning stakes in the firm) towards Aluminij. Yet, Bradvica adds, he has been completely unable to get in touch with the Federation’s government regarding a recently made agreement that could allow the company seek the needed working capital.
In April, Aluminij said it was close to an agreement with the Federation’s government, resolving a 16-year long ownership dispute, under which the government and Aluminij’s small shareholders will each get a 44% stake in the company. The remaining 12% will be held by the Croatian government. The potential agreement will help clear the way for the loss-making company to seek financing abroad from international institutions.
Bradvica said that since this agreement has not been signed yet by the Federation’s cabinet, although it was announced on April 18, he has asked Croatia’s President Ivo Josipovic to intervene and bring the issue at higher intergovernmental level.
“However, we are out of time now and this was the only sensible decision I could offer the supervisory board since I am not ready to allow the plant’s galloping into a loss that would result in an uncontrolled bankruptcy,” Bradvica said.
Aluminij’s trade union has also supported the management decision after seeing there is no other alternative, the company statement said. The union is, however, starting preparations for radical actions and will inform the public and the state bodies about them soon.
In November 1997, Aluminij was registered at the Mostar’s court registry as a joint stock company with the following ownership structure: 64% small shareholders, 24% – the Federation’s government and 12 % foreign capital. This capital structure, however, is disputed by the Federation’s securities registry, which refuses to proceed with the registration of Aluminij’s shareholders as required by law.
The company has launched a legal procedure against the securities registry in order to resolve the issue.
Aluminij recorded a EUR 33.6mn loss in 2012, well exceeding the initially targeted BAM 10mn loss. The loss was mainly due to higher electricity tariffs and falling prices on the metal market. In July 2012, the aluminium maker already shut down 12.5% of its production capacity as a result of continuous financial constraints.
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