Could you give us a short overview of the historical background of KAP since its creation 30 years ago and tell us about your experience in the last ten years while the country was under sanctions?
KAP has been producing for the last 30 years. The second phase of the production started 20 years ago and in total we produce 107 000 tones of commercial aluminum yearly. We have three production facilities. In the primary sector of the company we have 3000 workers employed and in other facilities 900 employees. KAP is the biggest company in Montenegro and there are a lot of other companies with which we work closely together, for example: Electroprivreda, Yugopetrol and the Railway Company. These companies, including KAP, are producing 32 % of the national product. KAP has its advantages and disadvantages depending on which angle you are looking at the issue of a big company in a small country.
During the sanctions KAP was always the bearer of Montenegro because it almost buried all the above mentioned companies and small firms that provide KAP with different services. Hundreds of small size firms are connected to KAP and when we were under international sanctions they all suffered with us. Taking into consideration that these companies make 53 % of the GDP of the country, it means that it makes 65 % of the budget.
Due to the sanctions on one hand and the breakup of former Yugoslavia on the other, we were in a desperate situation, I am sure you have heard stories about the gray economy in Montenegro. You can only imagine, as a person coming from the west, that it was a period of trying to survive physically. The international community has dealt with Serbia and Montenegro only through humanitarian organizations. We had minimum amount of food and medicine. I am completely aware of the rules of the international organizations . I understand that the ex-president of Serbia Mr. Milosevic is one of the main causes of all our misfortunes, but not the only one. I am one of the few people who had a completely different job two years ago. During the sanctions our production went down to 10 000 tones. The raw material was transported from Albania, Croatia, Macedonia and Bosnia. The price of one ton of aluminum, at that time was close to 4000 USD, an amazing sum of money. Also the bad management of KAP did not help us, we had debts for about 200 million-DM.
I am in KAP now for two and a half years. I started as a volunteer and I did not even imagine that I could become the director of this company. We have managed to pay back our debts and we have received a great help from different countries, especially the USA. We expect that the cost of one ton , by the end of the year, will be 1350 USD and at the end of next year around 1250 USD.
The important indicators investors look at are the financial results. Can you tell us something about the figures for this year?
Our plan for this year is to have an income of 170mln USD. The profit, after the investment projects and the debts we have to pay, will be around 24 mln USD. Unfortunately the price of aluminum is lower then last year but we have increased production.
Could you please tell us something about the management of KAP, your experience and the structural or management changes that have taken place. Is KAP an efficient company?
Today, the managing team consists of international experts who are mostly financed by the USA, and local experts. In total we are talking about nine people, including myself as the general manager. Apart from that we have a board of directors, consisting of nine experts as well. Four of them are appointed, some of them are university professors, a former ambassador of USA is one of them. The other four members are shareholders, three of them are members of the main creditors team and one of them is a member of Glencor. This means that Glencor is not our managing team, although it was approximately ten months ago. They have invested 25 million dollars in 1998 because the government was about to close down the factory. They gave us a very important injection of capital and starting from then the production has increased and the expenses decreased. However, there were different objections regarding the contract and it had to be temporarily stopped and later on it expired.
We are now working on maintaining the stability of the project and the lowering of our expenses. We are not satisfied with the price we have now and unfortunately we will have to reduce the number of employees. We had a reduction of 500 employees these last two years and in the following year we will have a reduction of an additional 200 . We hope, by the end of the year, we will have a new law on working regulations which will help us to resolve this problem more easily. According to my estimates and the estimates of the managing team, KAP needs about 2000 employees, with this number we will be able to achieve a firm development of the company.
Having Italy, one of the main producers of aluminum in the world close to us, with the port nearby and the railway in a good condition, and of course with good international relations we hope to build a strong company. We consider this year to be the year of reconstruction and stability.
| With 144 million USD sales last year how are you looking to expand the export capacity of KAP?
We export 92% of our production. The rest is for the internal market. This means that this year we plan to produce 107 000 tons of aluminum of which is 95 000 will be exported. This year we have been considering the possibility of entering the privatization process. It is a decision that will be taken by the government, if they decide not to privatize KAP for the next 4 or 5 years then we will modernize different sectors of the plant.
The modernization of the electrolyses, for example will cost from 40 to 50 million USD depending on its contents. The modernization of other sectors of the plant is from 9 to 12 million USD depending on the capacity. We need 200 000 tons, but we are able to produce 200 000 more.
If the government decides to proceed with the privatization, by the end of the year we will publish a tender and will start the process in the spring of next year. If the government, which holds 63 % of the shares, decides for the fast privatization then the part of the plant that will be privatized in the first stage would be modernized.
What would be your ideal privatization partner and what are you doing to reach this ideal?
In this field of the economy there are maybe 6 or 7 companies in the world that can be privatized. A few years back, there were more of them, but they are "swallowing" one another. This means that there are only a few companies that can be considered as serious partners, and some of them have already announced their interest. I have informed the government about it and the only difficulty we are facing now is the debt KAP has. It is the government that should decide weather to go for fast privatization and to resolve the problem of debts it has, or to wait a few years, slowly enter the process of privatization and to pay the debts step by step, so we can sell KAP in a few years time.
Can you assure the investors that the privatization will be a fair and transparent process?
It is not the managing team of KAP that is responsible for that. We can only be a good host, give all the data, and information. We are not authorized to do anything else. Usually in countries in transition, the process is followed with thousands of problems, this is why the government is in charge of it.
Can you talk about the importance of KAP for the image of the country and its economic development?
I have been here for only two and a half years. I have been following the history of KAP from other perspectives.
KAP was responsible for 80% of the export of Montenegro, when it was not under sanctions. Now KAP is producing only 40 % of the export. I hope this figure will be 80% again in the next two- three years. This will mean that the other parts of the economy are developing successfully.
Concerning funds, KAP is responsible for 9 to 11% of the Pension fund and the same part in the Health fund. More then 500 companies are depending upon KAP, they are supplying us with different kind of goods and services, like transportation or food for the workers, for example.
In towns where big companies are located, like KAP, many different branches of the economy are depending upon them. This relates to what I was saying at the beginning that there are advantages and disadvantages of having a big company in a small country. Our responsibilities are much greater then in other companies, in fact they go much further than the territory of the plant.
What was one of your biggest challenges during the past two years?
I would say that was the modernization of the reproduction process. Lowering the costs, eliminating all the criminal activities and what is very important, the increase of production for 35%, together with the improvement of the quality.
What would be your final message to the readers of "Forbes" magazine who are investors?
We are facing modernization, the money invested in KAP will be well used. You can earn a lot. We will always have the possibility of paying back the invested money. If the investor prefers even in the form of metal or sandy aluminum.
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