MOL and Richter

Mol , the Hungarian oil refiner, hired six banks to sell 2 billion euros ($2.8 billion) of loans to upgrade facilities and fund acquisitions.
Mol, based in Budapest, hired Citigroup Inc., Royal Bank of Scotland Group Plc, BNP Paribas, Bank of Tokyo-Mitsubishi UFJ Ltd., ING Group NV and Bank Austria Creditanstalt AG to sell the three-year loans.
Chairman Zsolt Hernadi denied earlier reports that the purpose of the loan is to finance a share buyback program, designed to prevent what the company calls an ``unwelcome''
advance from Vienna-based competitor OMV.
OMV doubled its stake in Mol to 19 percent in June and called for merger talks, which the Hungarian refiner has rejected. Mol said last month it will build gas-burning power
plants adjacent to the Hungarian company's refineries with Czech CEZ AS, central Europe's largest power company. This month the company signed a deal with Ina Industrija, Croatia's state-owned oil company, to expand their joint exploration of a gas field stretching across the border of Croatia and Hungary. (Bloomberg news)
At the beginning of the week, giant Golman Sachs investment bank raised the price of MOL 11% to HUF 30,000 as they claim that the oil company will benefit in 2008 from higher oil prices and wider refiner margins. MOL has been trading within the range of HUF 25,000 to HUF 26,000 for the past weeks.
Central European stocks declined at the beginning of this week, paced by banking shares including Vienna based banks Erste Bank AG and Hungarian OTP Bank after Citigroup cut its earnings forecasts for nine European banks citing a drop in credit-market revenue that will bring “wide-scale changes.”
Julius Baer one of the largest Swiss banking firms, recently increased their stake in Hungary’s largest bank OTP to more than 10 percent. The announcement was made after the Hungarian financial watchdog (PSZAF) approved the Swiss to take over more than 10 percent of OTP, but less than 15 percent stake in the Budapest based bank.

Richter, the second-largest listed drug maker in Central Europe and Hungarian company, may be forced by the country's damaged competitiveness and chaos in its line of business to scale down its domestic operations and seek increased production in Russia, Romania and India, Bogsch the CEO of the company said. He claimed that the conditions in these countries are much more attractive and the capacity could be utilized in a better way. However, this means only the additional or expanding capacities would be shifted which is a known intention of the company. Bogsch predicts a 20% decline in domestic sales for 2007 as no corrective measures to the health policy are seen. The analysts from Cashline Securities, Budapest, believe this is just another communication tool to put pressure on the Hungarian government. Currently, only 18% of the total sales come from the domestic market and its profit contribution will be even less by 2008. We believe that even if the worst case scenario fulfils, Richter will be able to save the amount that they will potentially loose in the domestic market for 2008 through cost cutting. Our analysts expect some minor negative effect in the trading, which could be counterbalanced by a possible HUF weakening against the EUR as Richter is an exporter company and has at least 55 percent of its total sales denominated in euros.