The Slovenia Times

Sunken Flagship



The Ljubljana District Court launched receivership proceedings at Slovenija Ceste Tehnika (SCT) on Wednesday May 15. A total of 760 employees are left jobless, joining many more who lost their jobs over the last few years. And now, at the end of months of uncertainty over the fate of the firm, the only remaining question is how much more damage the giant will cause in his fall.
The construction sector in Slovenia was hit hard by the economic crisis and now that the flagship of the sector has sunk, the expectation is that things will only get worse. Marija Magdalena Santl, who is in charge of debt restructuring at SCT, believes that with the receivership the jobs of 10,000 to 15,000 people in related companies and branches are at risk. Economist Rasto Ovin of the University of Maribor said to expect a 'blow to the banking system and everyone else connected to this (SCT) company.'

Nasty side effects

A few days before the court launched receivership proceedings, the head of the construction sector's chamber within the Chamber of Commerce and Industry (GZS) warned of the side effects of the receivership. According to Jože Renar: "The consequences will be even more negative in the long term, as Slovenia will not be in a position to capitalise on the positive effects of the technical, personnel and performance qualifications that Slovenian construction companies developed at times of growth.''
With a view to avoiding such damage, the construction company Cestno Podjetje Ljubljana (CPL) last month attempted to save SCT with a partnership and a substantial financial injection. It is part of a strategy at the firm: earlier this year CPL took over asphalt facility TAC from SCT to ensure the availability of materials. "If TAC went down, CPL would be finished as well'', explained CPL's executive director for sales and marketing Jure Kranjc in May. "It is the same with SCT because of the concrete facilities and everything else."

No reprieve

Yet a few weeks after CPL proposed coming to the rescue, the firm's management board decided not to go ahead with it. "In these times of crisis, we could jeopardise our own security by entering this giant," argues Stanko Petrič, the head of the board. After this, receivership became inevitable for SCT.
It has been a long, slow decline. In its eighties heydays, SCT was one of the biggest construction companies in Yugoslavia, employing more than 11,000 people. It is said that in the former Yugoslavia around 100,000 people lived off SCT. The company - which was founded in 1947 - built airports, motorways and buildings all around the former Yugoslavia, the Middle East and the north of Africa.
After Slovenia gained independence in 1991 and Yugoslavia fell apart, SCT lost projects in the former republic and the company had to downsize its workforce. But with its now 3,000 workers the company acquired many projects for the construction of the network of motorways in Slovenia.

The beginning of the end

After 2008 problems arose. Investigations into fraud and price fixing were launched against SCT's CEO Ivan Zidar; the housing market crashed; and, because the Slovenian motorways were finished, a stream of lucrative projects dried up. In 2009 the company was still in the black with revenue of EUR 775,000. But last year SCT had to put a loss of EUR 91m in the books. The number of workers decreased from 2,500 in 2004 to 960 in 2009.
In 2010 projects SCT had acquired in Libya, Bosnia-Herzegovina, Serbia, Kosovo and Albania were lost because of the company's bad financial situation. SCT struggled with high debts from a management buyout through which Ivan Zidar and his associates Aleksander Meze and Janez Jamnik bought the company. The three used SCT to pay back the loan they had to take for the buyout.
In an attempt to save SCT Zidar, Meze and Jamnik renounced their ownership this May making way for a restructuring and a possible partner. It was in vain. Slovenia's construction giant is dead and now the rest of the sector fears its own fate.


More from Nekategorizirano