In Business News this week: state bonds struck by Greek debt concerns, mining group withdraws big bond issue, Škoda Auto cuts production of best selling model, ČSOB comes in with positive profit figure and a Czech construction company is in line to win a Sochi Olympics contract.
State bond issue cut on market worries
Photo: archive of Radio Prague
There were signs this week that the Czech Republic is being directly hit by worries about debt-laden Greece and other struggling euro-zone members. The Czech Finance Ministry on Wednesday only placed around half of its expected issue of 15-year bonds during a regular offering, citing the higher return sought by investors. That demand for a higher return, or yield, is a direct result of investor nervousness about the risk of such long-term bonds. The move is worrying given that the Finance Ministry expects to raise around 280 billion crowns this year to cover the gap between what the state receives in revenues and pays out.
Mining giant NWR withdraws major bond issue
Photo: Tomáš Fencl
The same day there was another indication of that nervousness with the victim this time Europe’s biggest hard coal producer, New World Resources. NWR — which has most of its operations in the Czech Republic — was forced to pull a 700-million euro bond offer citing negative market volatility. The company added that it looked like being too expensive to raise cash via the bond issue given the negative sentiment affecting corporate bonds in Central and Eastern Europe. The bond issue — due to expire in 2018 — was aimed at covering previous debt and financing the company’s ongoing operations. NWR says it could try to raise money again when the market has settled.
Škoda Auto cuts Octavia production on German sales concerns
The Czech Republic’s biggest car marker Škoda Auto says it will cut production of its biggest-selling model, the Octavia because of low market demand. Škoda says it is likely to cut daily production of the model from 574 cars a day to 441 from the start of March, but a final decision on the timing has not been taken. Demand has fallen off in the company’s biggest single market, Germany. This might be because snowy weather is keeping buyers out of showrooms or because of the feared slump after the ending of German car scrap incentives.
ČSOB announced record profit in 2009
One of the country’s biggest banks, ČSOB provided some positive news with the announcement of a record 17.4 billion crown profit in 2009. That figure was boosted by the around 6.0 billion crown net proceeds from the sale of its Slovak operation and an improved valuation of part of its derivatives portfolio worth around a billion crowns. Compared with 2008, the bank reckons its net profit was down 17 percent. That is in line with analysts’ expectations. Around 30-40 percent of the bank will be floated on the Prague Stock Exchange this year but the Belgian banking owner will still retain control.
Construction company PSJ seeks gold in Sochi
Photo: CTK
Czech construction company PSJ stands in line to undertake a massive contract to build a hotel, flats, spa and leisure complex at the Russian Black Sea city of Sochi in time for the next Winter Olympics in 2014. PSJ has already signed the 520 million dollar, around 10 billion crown, contract to build the complex but financing for the project still has to be finalised. The project should be completed by 2013 in time for visitors to the Olympics
