Universal tries to make sense of itself
As prices on the WSE lagged earlier this year, company officials delayed the issue for one month. The company set the original share issue price at zl. 16 ($6.67) in late February.
After share quotations fell to almost zl. 8 ($3.33) a share in late March, company officials lowered the issue price 25% for the April 4 issue date.
The 100,000 employee-designated (zl. 12 or $5), common-bearer shares and 500,000 preferred registered shares (zl. 16) were all sold prior to the April 21 deadline, but interest in the remaining 2 million shares (zl. 12 a share) under public subscription remains low, says Tomasz *ukasiewicz, Universal SA vice-president of corporate development.
Now Universal depends on underwriters, who will buy shares at a discount, to fulfill their development plans.
Nonetheless, management believes that the sale of the 600,000 shares already purchased constitutes a success, especially in light of the depressed nature of the exchange, *ukasiewicz says.
Internal restructuring and new investment
Reorganization into five to six major business lines, organized along common activities, is a major goal for Universal, especially considering the eclectic nature of the company's current activities, which include everything from making condoms and telecommunications equipment to meat processing.
The company also exports consumer products such as bicycles, appliances, and camping equipment, industrial products, such as cable and wire, and commodities, including agricultural products petrochemicals, and metals. The company's trade is heavily oriented toward Western markets with Germany, the United States, France, the Netherlands and Great Britain, accounting for over 70% of revenues in 1994.
Some of the reasons for the firm's seemingly disparate activities are the historical remnants of communist planning - Universal was the official state intermediary for export trade until its privatization in 1990.
Investments in newer businesses, however, reflect management's desire to establish a presence in high-growth sectors and, by doing this, become attractive candidates for Western firms seeking domestic partners in these industries, some of which will open up to full foreign
participation later in the decade.
Examples of such investments include Universal's purchase of a 20% stake in Polsat SA, a nationwide Polish television network; modernization of its Univar petrochemical subsidiary, which will supply fuel to the Polish State Railway and later seek to establish a chain of gas stations; and construction of a new latex production facility at its Unimil subsidiary, which enjoys an 85% share of the Polish latex contraceptive market.
Universal has also entered the retail hypermarket sector, mainly as a site developer, but later hopes to establish and manage a chain of six to seven such stores with the assistance of a Western partner.
Investments are also being made in internal restructuring with the establishment of divisional business planning offices, which will be responsible for preparing joint marketing plans with strategic producers, and consolidating the company's sprawling base of 250 suppliers. The companies activities are currently carried out by an expansive collection of 50 domestic companies and 30 foreign subsidiaries so there is an impetus for coordination and consolidation of activities.
In total, Universal's capital expenditures were zl. 130 million ($54.17 million) in 1994, a level which management says will be maintained in 1995. "The investments we began in 1994 need to be completed," comments *ukasiewicz.
Challenges ahead
Managing this large collection of diverse businesses does not come without problems.
"We have had to liquidate four to five companies, and sell others, during the last five years where rapid development in diverse markets proved too difficult to manage," says *ukasiewicz.
While reorganization is a step in the right direction, the company's business mix remains quite complex.
The National Bank of Poland's planned flotation of the zloty in early May, and the anticipated appreciation which is expected to accompany such a move, is also likely to hurt Universal. Since 60% of the company's revenues are generated from exports, prices of its products on foreign markets could rise, making them less competitive. *ukasiewicz concedes that its low-margin businesses, like agricultural commodities trading, could suffer but says they are prepared to cut margins where they are able to remain competitive.
"We can also capitalize some of our investments quickly, if needed, to boost profits to satisfactory levels and satisfy investors, although we would prefer not to do this," he says.
The quality of the company's receivables also needs to improve - 22% of Universal's receivables were classified as "doubtful" in 1994. The problems resulted from the heavy indebtedness of two of Universal's subsidiaries, which amounted to zl. 32 million ($13.33 million). *ukasiewicz says this problem was solved when this debt, classified last year as receivables on Universal's balance sheet, became equity in a debt-for-equity swap late last year.
Universal's management considers the company to be in an advantageous competitive position. Other large trading companies, such as Elektrim SA, target different sectors, *ukasiewicz says, and smaller trading companies cannot compete with Universal in terms of capital and capacity.
But an increasing number of production companies are beginning to trade on their own accounts. This means that trading companies like Universal need to offer a number of value-added services in order to attract trading partners. So far, Universal's ability to offer services such as pre-financing, transportation, and joint investments with partner companies, has done the trick.
But as more and more companies develop the financial means to trade on their own, Universal will have to continuously expand and improve its services in order to keep and attract partners.
After share quotations fell to almost zl. 8 ($3.33) a share in late March, company officials lowered the issue price 25% for the April 4 issue date.
The 100,000 employee-designated (zl. 12 or $5), common-bearer shares and 500,000 preferred registered shares (zl. 16) were all sold prior to the April 21 deadline, but interest in the remaining 2 million shares (zl. 12 a share) under public subscription remains low, says Tomasz *ukasiewicz, Universal SA vice-president of corporate development.
Now Universal depends on underwriters, who will buy shares at a discount, to fulfill their development plans.
Nonetheless, management believes that the sale of the 600,000 shares already purchased constitutes a success, especially in light of the depressed nature of the exchange, *ukasiewicz says.
Internal restructuring and new investment
Reorganization into five to six major business lines, organized along common activities, is a major goal for Universal, especially considering the eclectic nature of the company's current activities, which include everything from making condoms and telecommunications equipment to meat processing.
The company also exports consumer products such as bicycles, appliances, and camping equipment, industrial products, such as cable and wire, and commodities, including agricultural products petrochemicals, and metals. The company's trade is heavily oriented toward Western markets with Germany, the United States, France, the Netherlands and Great Britain, accounting for over 70% of revenues in 1994.
Some of the reasons for the firm's seemingly disparate activities are the historical remnants of communist planning - Universal was the official state intermediary for export trade until its privatization in 1990.
Investments in newer businesses, however, reflect management's desire to establish a presence in high-growth sectors and, by doing this, become attractive candidates for Western firms seeking domestic partners in these industries, some of which will open up to full foreign
participation later in the decade.
Examples of such investments include Universal's purchase of a 20% stake in Polsat SA, a nationwide Polish television network; modernization of its Univar petrochemical subsidiary, which will supply fuel to the Polish State Railway and later seek to establish a chain of gas stations; and construction of a new latex production facility at its Unimil subsidiary, which enjoys an 85% share of the Polish latex contraceptive market.
Universal has also entered the retail hypermarket sector, mainly as a site developer, but later hopes to establish and manage a chain of six to seven such stores with the assistance of a Western partner.
Investments are also being made in internal restructuring with the establishment of divisional business planning offices, which will be responsible for preparing joint marketing plans with strategic producers, and consolidating the company's sprawling base of 250 suppliers. The companies activities are currently carried out by an expansive collection of 50 domestic companies and 30 foreign subsidiaries so there is an impetus for coordination and consolidation of activities.
In total, Universal's capital expenditures were zl. 130 million ($54.17 million) in 1994, a level which management says will be maintained in 1995. "The investments we began in 1994 need to be completed," comments *ukasiewicz.
Challenges ahead
Managing this large collection of diverse businesses does not come without problems.
"We have had to liquidate four to five companies, and sell others, during the last five years where rapid development in diverse markets proved too difficult to manage," says *ukasiewicz.
While reorganization is a step in the right direction, the company's business mix remains quite complex.
The National Bank of Poland's planned flotation of the zloty in early May, and the anticipated appreciation which is expected to accompany such a move, is also likely to hurt Universal. Since 60% of the company's revenues are generated from exports, prices of its products on foreign markets could rise, making them less competitive. *ukasiewicz concedes that its low-margin businesses, like agricultural commodities trading, could suffer but says they are prepared to cut margins where they are able to remain competitive.
"We can also capitalize some of our investments quickly, if needed, to boost profits to satisfactory levels and satisfy investors, although we would prefer not to do this," he says.
The quality of the company's receivables also needs to improve - 22% of Universal's receivables were classified as "doubtful" in 1994. The problems resulted from the heavy indebtedness of two of Universal's subsidiaries, which amounted to zl. 32 million ($13.33 million). *ukasiewicz says this problem was solved when this debt, classified last year as receivables on Universal's balance sheet, became equity in a debt-for-equity swap late last year.
Universal's management considers the company to be in an advantageous competitive position. Other large trading companies, such as Elektrim SA, target different sectors, *ukasiewicz says, and smaller trading companies cannot compete with Universal in terms of capital and capacity.
But an increasing number of production companies are beginning to trade on their own accounts. This means that trading companies like Universal need to offer a number of value-added services in order to attract trading partners. So far, Universal's ability to offer services such as pre-financing, transportation, and joint investments with partner companies, has done the trick.
But as more and more companies develop the financial means to trade on their own, Universal will have to continuously expand and improve its services in order to keep and attract partners.
