From insolvency to profits. Strnad kicked MICo into gear, it is looking for buying more companies

Source: Hospodářské noviny Date: 31.05.2023

Trucks with multi-ton loads from the Trebic company MICo appeared again on the narrow roads of the Vysocina in May, proof that the company and its 150 employees have overcome the worst period in its 30-year history. The manufacturer of pressure vessels and condensers for the energy and petrochemical industries went bankrupt last year and owed over half a billion. Under its new owner Jaroslav Strnad, whose engineering group CE Industries paid over CZK 140 million to creditors, the company underwent a reorganisation that ended in February this year. And a month later, MICo returned to a positive EBITDA operating profit.

Strnad's ambition is to make MICo the number one supplier of new nuclear units in Central Europe. As well as to maintain its key position as a supplier for the current units at Dukovany and Temelin. Despite the positive turnaround, the production halls in Hrotovice and Kramotín, a few kilometres away, are still rather empty.
Most recently, however, two large orders have been completed there: a 25-metre-long steel product for one of the large chemical plants and an 85-tonne capacitor for the Opatovice power plant. Together with parts for the two CEZ nuclear power plants, which will start to be assembled in the summer, this is a glimpse of the old days when the Trebic company had sales in the hundreds of millions of crowns a year. But even CE Industries does not expect MICo to break even in 2023. "The company was already not experiencing good times before the insolvency. We took it over in a bad situation and without new orders. We had to clean up the company, set up new processes and gradually gain the trust of our customers. We calculated that it would take us 1.5 to two years to get MICo into positive numbers," Adam Šotek, CEO of CE Industries, told HN. According to him, the group expects to provide MICo with CZK 50 million in working capital.

According to MICo's new CEO Petr Litvan, the company's turnover will reach CZK 200 million this year. This includes about CZK 30 million in sales from sister company MICo Servis, which makes seals for Russian VVER nuclear units. Last year, a crisis year, the company's turnover fell to CZK 131 million. In the future, Litvan said the company's turnover could reach 600-700 million a year.
Litvan believes that a bigger financial injection from CE Industries might not be necessary anymore, as new orders will stabilize MICo. However, their initial financing will not be possible without the help of the "mother". "But we still need six months to get the business up and running, so we are being cautious," Litvan explains at the larger 50,000 sqm production facility in Kramotín.

MICo acquired the site within sight of Dukovany in 2015, when the company was led by its founder Karel Denner. He built the company from a service organisation for the Dukovany power plant. Later, MICo started manufacturing heat exchangers and developed into a leading supplier of products in the energy sector. Especially for Russian reactors from Rosatom, which are also running in the Czech Republic. However, the company was involved in the construction of the British nuclear power plant at Hinkley Point by supplying tanks for backup diesel generators weighing 65 tonnes. Kramotín also produced a giant condenser for the Počerady power plant weighing almost 500 tonnes.

But then came a series of unprofitable investments. A plan to mass produce CoroVent lung ventilators, which was owned by a subsidiary of MiCo Medical, ended in a fiasco and a loss of tens of millions. Investments in start-ups and other projects of the MICo group, which at the time included about a dozen companies and was approaching a billion in turnover in 2019, also failed. Came the covid and also the problems of the "golden egg" of the group, whose profits had previously financed everything. And then the aforementioned insolvency in February 2022.

This led the company into the hands of industrialist Jaroslav Strnad, who has experience in buying up companies in trouble and transforming them. Probably the most successful story is the rescue of the Kopřivnice manufacturer Tatra. Strnad had already built the Czechoslovak Group arms concern, which he handed over to his son Michal. And he is now creating another engineering group, CE Industries, focused mainly on energy and railways. In addition to the Czech Republic, it is also active in Croatia.

Strnad came to MICo through his company Chemcomex, focused on assembly, which he has owned since 2020. The business of this company, also from Trebic, can be linked to MICo's production, which is why both companies are headed by the same director - Petr Litvan. He also indicates the group's interest in further expansion in the power engineering sector. "We want to supply larger technological units. That is why it would be interesting for us to expand into valve manufacturing," Litvan confirmed to HN. Although he did not name them directly, there are mainly two companies in the Czech Republic that would meet such a need. One is Arako, which is still owned by Russia's Rosatom and therefore has problems participating in contracts in the Czech Republic and elsewhere in Europe. Or another company, MSA, which produces valves.