Tržič, 28 July (STA) - Slovenian shoe producer Peko appears to have reversed its struggles of recent years, upping production in the first half of the year and securing orders for the rest of the year. Nevertheless, it is still facing cash flow problems stemming from the past.
The company from Tržič saw positive operating earnings in the first half of the year, when it produced around 100,000 pairs of shoes, an increase of over 50% from the same period last year.
While operating earnings were in the black in that period, that was mostly a result of the sale of real estate with which Peko sought to raise much needed operating capital. The company's regular operations were in positive territory in May and June, general manager Slavko Despotović said.
Among the real estate sold by Peko in the first half of the year was a disused plant in Croatia's Dubrovnik, while the company is still looking for buyers for several properties in Serbia.
It is selling the properties in a bid to raise the much needed capital for production as its struggles with cash have seen it face account blockages, but the worst appears to be over.
"Things are looking up for the rest of the year," said Despotović, who took over a year ago, explaining the company had secured a healthy number of orders for the rest of the year.
The improvement in fortunes means the state owner is now hoping to complete restructuring without the need for an outside partner to provide emergency funding.
In line with this, the Slovenia Sovereign Holding has proposed that the 27 August annual general meeting approve a capital reduction of EUR 4.7m to pay for past losses.
But in order to provide for development, the management would also be authorised to carry out a capital raising for up to EUR 2.6m within two years.
"The state has obviously taken the view that Peko can be restructured and has asked the management to find a partner which would provide fresh capital of up to 40% of shares, allowing the state to keep a controlling stake," said Despotović.
While talks with potential partners have not yielded major interest so far, the general manager hopes to be able to promote investment in the company at international shoe fairs after the summer break.
He believes the strategy of the state owners to allow the arrival of an investor is good for Peko and Slovenia.
Meanwhile, Peko is also looking for other means to boost growth, including at a possible move of production to Serbia, where it has traditionally had a strong presence.