Distressed Latvia’s metallurgy company Liepajas Metalurgs posts EUR 14mn loss in Q1.

By bne IntelliNews May 28, 2013

Troubled Latvian metallurgy major Liepajas Metalurgs (LM) posted LVL 10.1mn (EUR 14.4mn) losses in Q1/13 vs. LVL 0.52mn profit for Q1/12, the company announced on NASDAQ OMX Riga stock exchange. The company’s consolidated net turnover went up by LVL 11.5mn to LVL 78.3mn in 2013. The loss was attributed to unfavourable situation in the global metallurgy market and a lack of operational fund in the company.

Shareholders of LM will have to decide on either selling their shares or investing in company’s bail-out by May 31. The deadline was set at a special cabinet meeting last week. EconMin Daniels Pavluts told the press that insolvency is inevitable should the shareholders of the company ignore the requirements put forward by the lenders and the government. He reiterated that the government was “puzzled” by the hesitations on shareholders’ behalf.   

It was previously reported that two out of three largest shareholders of Latvian metallurgy major LM Segejs Zaharins and Ilya Segals in principle agreed to give up their shares in the company to the creditors for a symbolic price of LVL 1, earlier proposed by Preudentia financial advisor overseeing the case of LM. At the same time another shareholder Kirov Lipman reportedly rejected the plan, however, he previously voiced readiness to participate in the bail-out of the company and is reportedly looking for a strategic investor in Russia.

Prudentia saw giving up the shares as a way out of the deadlock in which the shareholders are not willing to invest their funds into the bailout of the company, which is required by the government. In order for the government to get involved in the bail-out of LM, shareholders of the company would have to invest LVL 25mn (EUR 35.57mn). The government will also set other conditions which include re-electing the board, coming up with a viable business plan, refinancing the EUR 1.7mn loan to UniCredit, and changing the suppliers’ structure. State support in case of complying with the conditions would amount to LVL 33mn in the form of loans from state-controlled institutions.

According to the report by nozare.lv, shutting down LM would translate into losing 1.2%-1.5% of GDP, as the company is one of the largest country’s employers, taxpayers, and exporters. Company paid 0.22% of total tax revenues in 2012, with directly or indirectly involving 39% of economically active population of the city of Liepaja.

According to the last report on industrial output, crisis in Liepajas Metalurgs already influences the output figures: in March in Latvia basic metals manufacturing declined by 36% y/y, fabricated metal products went down by 2.6% y/y. Industrial output in March decreased by 2.9% y/y. Decline in March follows first y/y decline of the indicator since the end of 2009 seen in February (down by 1.9% y/y).

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