Computer assembler fears coming apart

  • 1998-12-17
  • Kairi Kurm
TALLINN - When the Pennu computer assembler engaged in the leasing and real estate business it thought it would increase its profits, instead these extra activities might bring the company a total 36 million kroon ($2.7 million) loss.

In fear of financial trouble, Pennu's new owner Baltic Cresco Investment, Hansapank and the new management say the company should quit unrelated activities and return to its core business.

Cresco became the company's main shareholder Dec. 2, when it bought half of Pennu's shares, and together with the bank is now dictating company policy.

The press has speculated that by influencing changes in management and reorienting the company, Hansapank is trying to protect itself from financial trouble. The bank was Pennu's biggest creditor and the computer assembler owes it up to 50 million kroons.

Alo Koop, Pennu's founder and former board chairman, said the previous management knew in spring that they needed to get out of the real estate business although the leasing and real estate business was still considered profitable by most Estonians.

Most Estonian companies saw expanding into other businesses as a good way for dispersing risks - receiving profit when sales were decreasing. As Pennu's sales were not increasing, it launched an office building project and started a leasing branch.

The Tempelman investment company evaluated Pennu's core business and found that computer assembly was not growing.

"Three percent rise in the net turnover was achieved thanks to the good results in the second half of 1997," said Tempelman's in its assessment.

Koop said the real estate branch was established only to administrate Pennu's 50 million kroon building, which the company intended to sell after the construction was completed.

The construction of this office building was beyond Pennu's resources, and it has large loans to pay back. All attempts to sell the building failed. The Scandinavian telecommunications company Ericsson, which is now renting the building, declined the offer.

According to Tempelman's assessment, the land and buildings account for 36 percent of the company's total assets. Pennu now has to sell the property to cover claims, and according to Aripaev, might loose up to 11 million kroons on this office building project.

Pennu's leasing company, which was founded originally to provide financing for the purchase of computers, may also bring along big losses.

According to Aripaev, half of the 50 million kroon leasing portfolio is made up of bad loans. Only 20-25 percent of the portfolio is made up of computers, while the rest is real estate and cars.

To find a way out of these difficulties, Pennu planned to merge with Macrolink, the largest computer company in the Baltics. But since negotiators could not find an acceptable solution for both parties, the talks broke off.

Jaanus Rahumaa, Pennu's provisional board chairman, said because of the previous management's mistakes the company's shares are underestimated. The new provisional board is auditing the company and the results should be available at the shareholders' meeting on Dec. 22.