Montenegro acts to merge loss-making OZVS with railway co ZPCG

With all analyses showing that the bankruptcy of Odrzavanje Zeljeznickih Voznih Sredstava (OZVS) is unavoidable and since this would have a negative impact on both railway transport operations and the safety of the railway network, OZVS' merger with Zeljeznicki Prevoz Crne Gore (ZPCG) is the most acceptable scenario, the government said in a statement on Thursday.

The government added it is allocating up to 1.7 million euro ($1.8 million) of current budget reserves to raise the capital of the two companies and pay for the costs associated with the planned merger.

OZVS has been operating at a loss in the past years, resulting in persistent illiquidity and frequent cases of blocked accounts, the government said. Its loss for 2023 is estimated at 900,000 euro, coming on top of losses of 873,000 euro for 2022 and 574,000 euro for 2021.

The rolling stock maintenance firm's net working capital is negative since its liabilities are bigger than its receivables and inventory. Preliminary figuresOZVS' show its short-term liabilities were almost double its short-term assets at the end of 2023. As of end-2023, its total liabilities reached 5.97 million euro.

The company had 189 employees at the end of last year. The state controls 85.4% of OZVS' capital.

According to the latest available company data, ZPCG's profit dropped to 971,000 euro in the first nine months of last year from 1.43 million euro in the comparable period of 2022. Its accumulated loss totalled 24.5 million euro at the end of September 2023, while its total capital amounted to 16.6 million euro. The government controls 90.8% of ZPCG.

OZVS shares last traded on the Montenegro Stock Exchange on February 6, gaining almost 20% to close at 1.46 euro. ZPCG's shares last traded on 21 March 2023, closing flat at 0.399 euro.

($ = 0.931 euro)