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PPF: Crisis in Czech Republic getting underway

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The investment group PPF, which belongs to the richest Czech Petr Kellner has disclosed for the first time its stance on the financial crisis and the way it wants to cope with the it.

“We perceive the crisis much more seriously than the majority of local entrepreneurs. We regard the opinion that the Czech Republic will remain a safe heaven as complete nonsense. The economy and the collapse is happening on a global level, and the crisis in the Czech Republic is just getting underway,” PPF co-owner and director Jiří Šmejc said in an exclusive interview with HN.

PPF’s response to the crisis will involve two main steps – hefty cost reductions, including job cuts, and, on the other hand, plans to raise billions of euros to buy companies that are now significantly cheaper as a result of the crisis.

Šmejc said PPF would save billions a year thanks to job cuts within the entire group. Moreover, a reduction of bonuses for the next two years is now being negotiated with the managers, who will stay with the financial group.

The cost-saving measures concern the subsidiary Home Credit, a hire-purchase company with extensive activities in Russia and other countries, as well as the PPF group itself. The objective is to remain profitable even at a time when new deals are expected to fall. With banks unwilling to lend money at present, the group’s plans for next year should enable Home Credit to continue operating even if it does not get any money on the market. “The financial market is not working at the moment and I think this will continue,” said Šmejc.

At a time when banks and businesses all over the world are accumulating cash, PPF has decided to hold EUR 500 million in cash as a reserve “for bad times”, he added.

Apart from that, however, the group sees big opportunities and is planning major acquisitions.
“We have decided to build a structure of private equity funds right within the PPF group. There should be an international institutional investor participating in the structure,” said Šmejc.

The plan is to raise billions of euros for new investment projects. “We want to begin with a limited number of investors and then open the funds to everyone. We want to combine all the investments with our own capital,” Šmejc said. The funds should be ready within a year.

The group PPF administers roughly CZK 240 billion worth of assets. Besides the Czech Republic, Russia, Slovakia and Ukraine, it also operates in Kazakhstan, Vietnam and China, for instance. PPF will eye mining companies and retail chains, among other things.

Economists describe the PPF plans as feasible. “Many investors abroad as well as in the Czech Republic think like that. There are many opportunities now because not all companies facing troubles are in a bad condition,” said David Marek of Patria Finance.

“I think it is a good idea. Many small investors could find the plan and its timing interesting. The dramatic fall in the value of assets will provide enormously good opportunities,” Pavel Sobíšek of UniCredit Bank said.

Translated with permission by the Prague Daily Monitor.

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