Policolor lays off 40% of employees

Paint maker Policolor Bucharest will soon lay off 40% of its nearly 850 employees, following the closing of the resin-making section, the main raw material used in producing paints.
The decision was prompted by financial reasons, as soon as the company management and the main shareholders realised it was cheaper to import resins than to make them.
“The price of the resins made (i.e. by Policolor) is not competitive. One of the reasons is the introduction this year of the high excises levied on some of the raw materials we use for making resins and the time-consuming laborious procedure that enables the producers to recover these taxes,” Marius Golopenta, Policolor general manager says.
Policolor could import resins from Bulgaria, where it controls the main resin producer Orgachim.
Policolor was privatised in 1997, with the controlling interests bought by two of the largest investment funds in Romania – Romanian Investment Fund (RIF) and Romanian American Enterprise Fund (RAEF).
In the post-privatisation years during which Policolor had gradually lost some of its market share, the two investment funds hired an American management company, which applied the first serious restructuring programme that also ended in massive layoffs.
The start of the new personnel and production restructuring programme soon will prepare Policolor for the main event that could take place next year, the exit of the investment funds. The sale will also be due to the RIF’s life span coming to an end in 2003.
The company says there are other reasons, as well, besides the lack of profit registered by the resin section and the impending sale of the interests by the funds.
“The international trends of the industry show a specialisation of the companies and a separation of the varnish and paint making and of the resin making operations,” Golopenta says.
The layoffs will be done by using “compensatory solutions” and by providing professional retraining courses.
Policolor estimates to make 681.53bn ROL ($20 million) in operating revenues this year, 46% more than in 2001, as well as 63.91bn ROL in net profit, three times higher than last year’s profit.
Policolor at the end of last year was the Romanian paint market leader, according to the company officials, accounting for 37% of the total domestic production and for 15% in market share.
The company is listed on the Bucharest Stock Exchange, where its shares have performed very well this year. The price of the shares has doubled, closing at 5,350 ROL on Friday. Considering this price, Policolor’s market capitalisation amounts to $11.5 million.