Today, we would not survive separately anymore
December 9, 2010 – Interview - Chairman of the Board and CEO of Slovnaft, a.s.for Hospodárske noviny
* I the past, you prepared a programme for the Independent Hungarian Initiative, worked with the Hungarian Coalition Party, yet more than ten years ago you said you quit politics. Today, you are the CEO of Slovnaft. Can such a strategic company keep out of politics?
Yes and no. Large energy companies live in a certain political and social environment, just like everyone else. They have to be aware of the fact that they depend from politics, since politics makes rules for markets like tax laws or regulation laws. Slovnaft also has to watch these laws, apply them and signalise if they have a strong negative effect. Slovnaft' s strenght is apparent, it produces two per cent out of the GDP and thus is a partner for politics but not a creator of laws. I personally do not ever want to return to politics.
* Does the Government accept you as a partner when creating energy laws?
We are a part of the Republic Union of Employers through which we communicate with the Government. We are also a member of the assembly fo companies, who sell oil and petrochemical products in Slovakia. Through this platform, we communicate with the Ministry of Economy.
* How do you get with the Government, if we take into account that it was the Ministry of Finance that during the governance of Mr. Ivan Mikloš fined you for a monopoly position on the market?
We had a lawsuit that ended with an uncertain result. We try to percieve each government only through measures that it takes. I welcome those that aim at starting up the economy. Consumption for us is a vital factor of existence. When it drops, we feel it, when it grows, it is a good signal. Compared to other countries of the region I see the development in Slovakia positively. The government so far help the business environment and I also understand that we have to pay for the deep deficit. But also the government has to clean up its' own porch.
* Where do you see the boundary between how pricing should copy the development on the market and the social aspect – to not raise prices because it could affect people?
We can not look at pricing like this. Our pricing has to come out of the European market which is limited by the European Union. Besides that, there is also the Central European market and that is limited by logistic effectivity of supplies. Within this region, we sell in a circle of 500 – 600 kilometres. And there is a fierce competition on this market. We export 75 percent of products, but at the same time around 40 percent come to Slovakia from abroad. That means that prices in our region depend upon offer and demand and can not be created on a political basis.
*
Prices of crude oil before the crisis had broken several records. Whent the crisis arrived, consupmtion and at the same time demand for oil decreased. When did you feel this?
Immeditely. Our products are quoted at all stock exchanges, so we were clearly a part of the decrease. And while for instance electric energy was keeping a high price still a year and a half after the crisis started, we had higher inputs and prices were low. Therefore, we started to reduce inner reserves, which means costs. The greatest ratio, 80 percent out of the costs is represented by externalities like crude oil, electricity and gas.
* Did you also cut jobs?
We agreed that we did not want to. Back in 2002 we dramatically cut the number of our core employees. We also decided to not cut any employee benefits. It is a part of our corporate culture. We neither cut wages, nor have raised them. Maybe another management would save more, but I am not convinced it would bring greater benefits for the company. I could cut employment by 10-15 percent, but when the crisis ends I would not be able to get back those experts who have been working here for ten or fifteen years. On the other hand, we startet to look at the company differently. We are adjusting it to a more flexible regime despite the fact that the petrochemical and oil business is due to environmental threats rather conservative.
* Did you also have to slow down investments?
Even though very few people see it, we invest significant volumes each year. In normal times it is around 100 million euro. We continue investing despite the crisis if the return of investments is one to one and a half year. We also make investments that are required by the law, such as decreasing sulphur emissions in the heating plant. This is an investment of 50 million euro.
* Where are the barriers of profitability, when you can invest during a crisis?
We had two sources: One was in depreciations and another in unpaid dividends which are approximately 300 million euro. They have not been withdrawn by the shareholders for the past few years. Besides reserves it is also the fact that we are a part of the large MOL group.
* Russia has recently warned other countries that they could lack oil due to Belarus experiments with Venezuelan oil. Are we threatened?
I do not think there is an essential reason to worry. There is an agreement with the Ukrainian government, that there will be no reverse supplies of oil. Of course, there may be three or four days fluctuations. But the truth is that for Belarus itself it is useless to take Venezuelan oil when there is cheaper Russian oil available.
* Unlike the gas pipelines, we have an alternative. Would it be enough?
Here is a pipeline that has been tested, the Adria. Due to caliber of the pipe which is by one half smaller, Slovnaft would run at half performance, but there still would be oil. It could even push it back through Hungary to Ukraine and from there back to Búdkovce. Here we have another possibility of a reverse run from the Czech Republic, even when the capacities there are smaller. And the quality of oil is different. Slovnaft is adjusted to process heavy suphurized Russian oil, so we would have to reset the production units. It is a challenge.
* Statistics are already showing a recovery of the industry. Do you feel it?
We feel a recovery of consumption, after the excise tax adjustment and above all a change in the consumption of diesel. With diesel, we will close the year with a 15-16 percent growth. Since the decrease of excise tax rates it monthly makes some 18-19 percent. But we also have markets in the Czech Republic, Austria or Poland, where consumption of the market drops, or in the better case it stagnates. I have to say there is no European market where we would not have to struggle with our competitors for each sold litre.
* Can you imagine that today, Slovnaft would not be a part of MOL? Could it survive the crisis on its' own?
I do not think so. Some time ago, MOL took over a Croatian refinery INA. The reason was its' unfavourable financial situation. In our business, you have to be part of a big international corporation, but not only for economic synergies, logistics or production optimalisation. I can not imagine that Slovnaft would do upstream – extraction of oil or gas. We have always been set to their porcessing. If we were not a part of this group, there would also be no profit advantages.
* When OMV wanted to merge with MOL, there were rumours that it would have to get rid of Slovnaft. Would it mean the company was about to be transferred to other players?
Definitely. It was already chosen who would buy it. It was an Eastern European Group.
* Lukoil?
I would rather not be any more particular.
* As a lawyer, you advised MOL woth the acquisition of Slovnaft years ago. What were the advantages of MOL and those of OMV?
I cannot tell now, but the culture of Slovnaft may be closer to the culture of MOL. Or to put it another way – the fact that Slovnaft today is a very successful company within the MOL Group may be a proof that the choice was right. Slovnaft has strenghtened technologically, in management and business itself. A part of our people already work in Croatia, Pakistan or somewhere else in the group. I am not sure I could say this if we were a part of OMV. If you look at big companies like Slovnaft, in Slovakia there is only very few of those, where 99,5 percent of the top management is represented by Slovaks.
* Many oil companies sold their retail networks during the crisis. Your opinion is different.
Yes. You do not need any retail network where there is no refinery. But we build our gas stations in this region, so we can supply them with products from our five rafineries in the group.
* Do you check the quality of fuels on your stations?
Yes, we have to and we want to.
* So there would be no differences in quality?
Not on our stations.
* Do you only buy your own fuel at Slovnaft stations or do you time-to-time buy from competitors?
Personally I do not have any problem to tank from others. But I think our gasoline is the best, but as fara s services – the vary. That is why we for instance want to launch new coffe machines. To offer better coffee.
Who is Oszkár Világi
JUDr. Oszkár Világi finished his studies at tha Faculty of Law of the Comenius University in Bratislava in 1985. In 1991 he reached the academic degree D.C.L. A year later he founded a successful law office Csekes, Világi, Drgonec & Partners.
From 1990 through 1992 he was a member of the Parliament and vicechairman of the Czechoslovak Parliament. Throughout his professional carreer he was at many managing and supervisory positions of distinguished Slovak companies. From 2003 to 2005 he was a member of the Supervisory Board of Slovnaft, a.s. and from 2005 a member of the Board. Since May 1, 2006 he has become the CEO of Sovnaft and since April 18, 2009 he has been its ' chairman of the Board.
