As Poslovni Dnevnik/Marija Brnic writes, yet another year has passed, and the restructuring programme of the Vukovar footwear manufacturer Borovo still hasn’t been placed on the agenda of the Government and the Assembly. It’s a complex issue and because of the area in which this once large industrialist is located, it’s also a sensitive case involving a problematic state-owned company which has already passed the stages of pre-bankruptcy settlement and financial consolidation.
A new plan to save production, which still employs about 600 workers, has been in the works for a long time for Borovo. At the beginning of last year, the consulting company KPMG began preparing the restructuring programme, which was requested by the majority owner of the Centre for Restructuring and Sales (CERP). More precisely, as explained by Borovo’s management, KPMG has arranged the framework of the programme. The first phase included looking deeply into the current situation, the second phase involved the analysis of the future situation and proposing business improvement measures, but the third phase, which is crucial for implementation, has yet to be determined or confirmed. It envisages the recapitalisation of Borovo that would be carried out by the state, but the details on it haven’t been published.
“The model of refinancing our liabilities and recapitalisation is an integral part of the restructuring plan, which is in the final phase of the agreement and we can talk about it more precisely after its adoption,” said Gordana Odak of Borovo. However, she hasn’t offered much of a glimpse into the reasons as to why the case hasn’t yet found itself firmly on the table of the government.
All that has been stated is the expectation for the plan to be completed by the end of the year, so that it can be adopted and implemented at the beginning of the year. It sounds incredible, because neither the City of Vukovar, nor the state, nor the programme of Slavonia, Baranja and Srijem, have come up with a final solution to this case, which is obviously less than comfortable for any government to try to deal with. The weak point they refer to in closer circles is the question of whether this restructuring programme should be sent to the European Commission for approval before adoption. Meanwhile, the company, which is already struggling to maintain its business, is additionally struggling in the conditions of the coronavirus pandemic.
In the report for the last business year, Borovo’s management states that the company “isn’t able to independently settle all of its regular due liabilities and independently maintain and finance current operations”. This burden has been inherited, as have the emerging problems from lengthy lawsuits. The pandemic is yet another weight to carry. One of the details from the list is that Borovo has an unresolved property issue in the amount of 150 million kuna, of which a significant part is the issue of interstate agreements. The biggest “weakness” are liabilities to Croatia Osiguranje (Insurance) for a loan of 6.1 million kuna.
Last year’s revenues totaled 89.5 million kuna and were 28 percent lower than in pre-pandemic 2019. The President of the Management Board says that last year’s retail revenues fell by 22 million kuna compared to 2019, and compared to the pre-pandemic results from 2019, these revenues from the first nine months of 2020 were lower by as much as 6 million kuna. The only very slight increase hasn’t provided much satisfaction to Borovo, which is aiming for 2019 levels, and there is full awareness that the recovery from the consequences of the ongoing pandemic will take longer than expected.
KPMG’s restructuring programme, which refers to the situation and the necessary measures for maintaining business across a five-year period, envisages a reduction in sales outlets and the number of employees, a change in the production process itself in which the leather range should be reduced and an increase the share of rubber products and specialised work footwear should occur.
According to official data, Borovo currently has 74 stores, and the restructuring plan envisages the permanent closure of 10 to 15 outlets that are now unprofitable, and this process would be realised gradually, over a five-year period. The number of employees would be reduced at the same pace, with the figures not being communicated for the time being, but it has been emphasised that this procedure will go through a gradual natural outflow with retirement.
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