Chinese management gives Hungarian chemicals factory rebirth

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by Xinhua writers Zheng Kaijun, Yang Dingdu

BUDAPEST/SHANGHAI, Jan. 20 (Xinhua) -- "All's going well," Vattay Balazs told his fellow workers, taking off his helmet and gas mask after a routine checkup in a compressor hall of a chemicals plant in northern Hungary.

Balazs, 35, is the superiantendent of a production line in the Kazincbarcika-based BorsodChem Ltd., a leading European isocyanate producer, which supplies raw materials to a wide range of industries like automotive, construction, clothing, footwear, electronics and pharmaceuticals.

Pointing at a paper of bar-graph pinned on the wall of his office, Balazs said proudly that his team had contributed in the past month the most feasible suggestions to the company that included ways of saving cost and optimizing production processes.

"It's something like a competition regarding to how many useful advices we give. Teams compete, individuals compete, too," he told Xinhua in a recent interview.

If a piece of advice is accepted and really works, part of the earning or saving as a result of the modification will be given as a reward to the proposer, he explained. "That makes the entire company in good function, rigorous and vigorous."

However, said Balazs, things could have been the other way around if the Chinese did not show up.

BorsodChem, founded in 1949, was bought by British buy-out fund Permira and Vienna Capital Partners in 2006. But it ran into severe difficulties in 2008 due to a seized-up global market and the fact that the owners -- two financial investors, had little to offer in terms of technical innovation.

"The company was dying. We were about to lose our jobs. Families were in despair," said 38-year-old Ombodi Gabor, a colleague of Balazs.

One in 10 in Kazincbarcika, a town with a population of about 30,000, works at BorsodChem, Gabor estimated. Many local young people studied chemicals to work for the company, the only big employer available near home, but only to find the "global" financial crisis was so close in reach.

In 2009, Wanhua Chemical Group, one of a number of Chinese companies that were "going global," started negotiations to buy BorsodChem's mezzanine debt. It acquired the full control two years later, when the company had a debt of some 150 million euro (about 160 million U.S. dollars).

A chemicals giant based in Shandong Province, Wanhua started the restructuring of BorsodChem in a timely fashion, brought in advanced techniques and new ways of management. Moreover, it cut no jobs.

"There were over 3,300 workers, and the company was in the rim of 'liquidity zero.' But no one was fired," said Berecz Ostod, a folklift driver at a BorsodChem warehouse.

The move also saved troubles in the upstream and downstream businesses like logistics. "Wanhua is professional in the industry. It has the confidence in rejuvenating BorsodChem and continuing to feed us. And we trust it," said Ostod.

The new owner also invested in environmental protection and safety production so as to allow the company grow in a sustainable way.

BorsodChem was turned from loss to gain in 2014. In 2015, its net profit (before adjustment) totaled 50 million euro (about 54 million U.S.dollars), and the figure of 2016 might reach 90 million euro (about 96 million dollars).

The company has become a healthy cash generator, with its margin of earnings before interest, taxes, depreciation and amortization in 2016 being the top among the peers in Europe.

As the Hungarian government lauded BorsodChem's rebirth as a model of the development of Chinese-Hungarian business relations, Hungarians in China also see such collaboration inspiring and encouraging.

"We only hear about positive things about the operation (of BorsodChem)," Rupert Varnai, CEO of Cathay Associates, a global legal service network specialized in Chinese companies' global expansion, told Xinhua in Shanghai.

Varnai, a Hungarian, said it seemed that Wanhua followed the golden rules of M&A (merger and acquisition), as it was prepared for unforeseen compliance issues, paid attention to the fusion of Chinese and European employees, and was able to create its own management culture.

Varnai holds an even brighter forecast for China-Hungary interactions, as the Belt and Road Initiative goes gradually from paper to reality.

"The presence of Huawei, ZTE, Bank of China, the Chinese involvement in the Budapest-Belgrade railway line, and the continuously growing number of tourists, etc. are all signs that the expectations are right and are in synergy with the Belt and Road Initiative and Hungary's Eastern Opening policy," he said.

"A lot more can be expected both in the short and the long run," he added.

(Yang Yongqian in Budapest, You Zhixin in Shanghai contributed to the story.)

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