Mechel sells Romanian factories for symbolic amount to stop bleeding money

Russian steel company Mechel sold its factories in Romania to a company called Invest Nikarom, for a symbolic amount of around USD 70, the company recently announced. The four factories, Ductil Steel S.A., Campia Turzii S.A., Mechel Targoviste S.A., and Laminorul S.A were temporarily closed down in fall 2012, because of the unfavorable prices on European markets, with the growing price of scrap metal and the low demand for final products. The sale is in line with Mechel's strategy of exiting the European metalurgic sector, which is suffering chronic loss. “With a significant loss for the Romanian companies in 2013 estimated at 2.4 billion Russian roubles (around USD 80 million), the current transaction will have a positive financial impact on our shareholders. The freed cashflow will be re-directed to the operational activity and to reducing the company's debt,” said Evgeny Mikhel, general manager of Mechel. The sale prices comes as a surprise, as earlier in 2012, Mechel announced plans to sell all its Romanian companies for some USD 150 million, according to Romanian media. This was part of a wider series of sales in its Eastern European Steel Division. The company said production will continue, but some layoffs were in sight. Invest Nikarom, the buyers of Mechel's Romanian factories, has a turnover of USD 400,000 and a loss of some USD 30,000. It was among the potential buyers in the privatization of Romania's Cuprumin, but was unsuccessful. It is yet uncertain what the buyer will do with the factories, and whether production will be re-started. Mechel had entered the market in 2002, with the purchase of the Targoviste factory, and it expanded throughout the country. editor@romania-insider.com