MOSCOW. (RIA Novosti political commentator Yana Yurova.)
The Federal Property Agency has proposed that a 34.01% stake in truckmaking major Kamaz be included in plans to privatize 1,048 federal enterprises and 457 economic associations in 2006, said Igor Grechukhin, the Economic Development and Trade Ministry's director of property and land relations and natural resources.
Kamaz, based in Naberezhniye Chelny, Tatarstan, is one of the biggest players on Russia's domestic truck market and occupies nearly one third of it. It is the last remaining state-owned enterprise in the auto sector, and its privatization may be the largest state property sale in 2006.
The decision to sell off such a large interest in the firm confirms the state's ongoing structural reforms in the economy, part of a strategy to reduce spending and bring in extra budget revenues. The Economic Development and Trade Ministry expects that privatization in 2006 will add about $1.1 billion to the federal budget, and the state will retain property only in strategic economic sectors.
The state could perhaps keep Kamaz for itself if it were not for the enterprise's protracted financial problems. Superficially, Kamaz looks like a fairly successful truckmaking major. It is among the world's top ten manufacturers of heavy-duty trucks, and ranks eighth globally in terms of the number of manufactured diesel engines, as well as building trailers, buses, tractors, engines and all kinds of tools. Kamaz includes 14 separate businesses that develop, manufacture, assemble and sell automobile equipment and components, and has a total of 110 facilities.
Figures for 2004 were also impressive. Kamaz registered net profit of just over �6 billion, with profits of over �1 billion - or nearly �400 mln more than in 2003. Over the past three years production and sales have been growing by 20% a year.
Kamaz was among the first cash-strapped firms to adapt itself to the Russian market by launching leasing programs. According to the magazine Expert, in 2004 Kamaz' leasing department was eighth in Russia in terms of contracts signed and 15th in terms of funds received. It occupies an honorable third place, after Volvo and Scania, among companies offering trucks for leasing, leasing 2,061 units in 2004, or 165% more than in 2003.
On top of this, Kamaz has had success abroad, with total exports in 2004 of over $197 mln, 34% more than in 2003. Today every fourth Kamaz truck goes abroad to more than 60 countries, with traditional major destinations being Egypt, Saudi Arabia, the United Arab Emirates, Ethiopia and Ecuador. In 2004, Kamaz took on new markets, including Hungary, Slovakia, Serbia, Qatar, Iran, Lebanon, India, Bahrain, Pakistan and Bangladesh, and opened assembly facilities in Poland, Kazakhstan, Azerbaijan, Ukraine, Ethiopia and Vietnam.
The company has also become an official supplier for the UN, and seen its trucks go to Yugoslavia, Israel, Jordan, Lebanon, Cyprus and Afghanistan. The company's largest delivery so far was to Iraq, where about 4,000 Kamaz trucks were sent from 1999 to 2003 under the UN Oil for Food program.
But all these achievements have failed to solve problems that have built up over the past 15 years. Net profits total between 0.5% and 1%, against an industry average of 5-7%, while by the end of 2004 debt had increased almost by �200 million on the previous year and exceeded �800 million - or almost the same as its profits for the year.
Kamaz also decided to pay no dividends to its shareholders last year. Meanwhile, the government will demand that all fully or partly state-owned companies pay dividends of 20-25% of net profit in 2006, and hopes to increase this figure in future to 40-50%. This year the demand was 10%. Understandably, it will be difficult for Kamaz to cope.
Experts estimate that state shares in Kamaz will fetch $135-145 million at current prices. Metals tycoons Oleg Deripaska and Alexei Mordashov have been seen as possible buyers, as their companies control major carmakers and producers of auto components. But debt repayment and modernization of the enterprise will require considerable investments that probably only foreign investors can afford. Of these there are very few - perhaps only Germany's MAN, Sweden's Volvo and big Chinese and Korean carmakers.
