Prospect of Oltchim's privatisation sends share price up 70% in last month and a half

The shares of Oltchim Râmnicu-Vâlcea (OLT), the biggest petrochemical facility in Romania, have been heavily traded by Stock Exchange investors, which brought the shares' market value up by around 70% in just the past month and a half alone.

Whereas in mid-February an Oltchim share was traded on the market for 0.2 lei, yesterday the price reached 0.338 lei with transfers on the market amounting to 43,000 euros. The company is currently valued at 28.2 million euros, and last year posted over 1.3 billion lei (310 million euros) in sales. Aerostar Bacău (ARS), which has a similar capitalisation, posted 158 million lei (37 million euros) in sales in 2010.

"I think the market expects a major change to occur at Oltchim over the next few quarters, either a privatisation or a capital increase, because it cannot go on indefinitely as things currently stand, amid massive losses from operations and from its financial activity. Under the new arrangement sealed by Romania with the IMF emphasis is laid on resolving the problems of loss-making state-owned companies, with Oltchim being one of them," says Andrei Rădulescu, analyst at brokerage Target Capital. The Stock Exchange rises have been fuelled by speculations as to the start of the company's privatisation process by the state, which is pressured by the IMF to stop the massive losses recorded by some companies, among which Oltchim.

Oltchim has recorded losses of over 200 million lei (50 million euros) in each of the last three years after the Austrians at Petrom decided at the end of 2008 to close Arpechim, which was the only source of raw material of the Vâlcea-based plant, and resulted in the company cutting production by over 65%.