After it all, the company has survived to become one of the leading lubricant suppliers in the Balkans. It is slated to go on the sales block soon, and one potential buyer is a Russian energy company that happens to be one of its main competitors. Apparently, the twists and turns may not be finished. Still, Fam officials say the company will fight to maintain its position at the front of the Serbian lubes industry.

Fam manufactures lubricants at an industrial park in the central Serbian city of Krusevac. The 19-hectare site appears large enough to house a refinery, let alone a blending plant, and features 14,100 cubic meters of storage tanks for base oils and additives, two buildings that house lubricant and grease production lines and a loading dock for shipping and receiving the finished products and base stocks. Both production lines have computerized control rooms where operators input codes to carry out the blending and packaging of each product, be it a motor oil, fluid or grease.

Fam, which employs a total of 224 people, maintains its office headquarters at a separate location in downtown Krusevac. During a September interview there, General Director Vladica Petrovic and Technical Director Borislav Nikolic recounted the company’s history and gave much of the credit for its success to the late former general director, Stanoje Andjelkovic. Andjelkovic headed the company in the 1980s, when Fam achieved rapid growth thanks to its first broad penetration of the lubricant market in central Serbia, which at that time was still part of Yugoslavia. In terms of volume, Fams production peaked in 1982 at 34,000 metric tons.

Andjelkovic was still general director in 1992, when Fam was absorbed by Nis, the state-owned Petroleum Industry of Serbia, during the break-up of Yugoslavia. Fam remained part of Nis until 2005, when the lubricant business was restructured as a separate entity ahead of the governments sale of a controlling stake in Nis.

Russian oil and gas giant Gazprom ended up buying a 51 percent share of Nis. The government also looked for a strategic investor for Fam and found one in 2007 in the person of Milo Djuraskovic, a road construction baron from Montenegro. That turned out to be a wrong turn for Fam, as Djuraskovic extracted more of the companys capital than he initially pledged to invest.

Now he is in jail and waiting for a trial, Petrovic remarked. He is accused of mismanaging 32 million. And, as many times before, when Fam needed support, the state of Serbia stepped in and straightened our fiscal stability. To keep the company from going out of business, the state provided low-interest loans and again became majority share-holder.

Now preparations are being made to once again find a strategic investor. As a main shareholder, the state is cautious after the previous privatization. A memorandum expressing interest in acquisition was recently submitted by Gazprom, but a deal is still a distant prospect, according to Petrovic.

It could be a step to eliminate competition, Petrovic said. Gazprom is also the main foreign investor in the countrys lubricants industry. It is pushing very hard with its brand, Nisotek, and it sees us as a competitor.

It is also possible, Petrovic said, that Gazprom does not want to shut Fam down but sees it as a vehicle for growth in the region. Fam is one of the lubricant market leaders in this part of Europe, he noted.

Fams management is not opposed to a strategic investment by Gazprom as long as it benefits workers. Meanwhile, Petrovic said Gazporm will probably be content to sit and wait because it considers the current price of Fam too expensive.

Before Gazprom bought into Nis, the Serbian oil company was Fams main supplier of naphthenic base oils. Honestly, we have very bad experience with Gazprom, Petrovic said. These days they are monopolizing the base oil market in Serbia. They cut the supply of naphthenic base oil, although the base stock is not imported from Russia, but produced and refined in Serbia. The reason why they do this is clear; they see us as their main competitor in the lubricants segment.

Asked to respond for this article, Nis offered its own complaint.

Nis used to supply Fam with distillates, Nis press office said in a written statement. However all deliveries have been cancelled due to unpaid debt of Fam to the company Nis. As a market-oriented and responsible company, caring for its customers and fulfilling all of its obligations promptly and in time, Nis expects to be treated in the same manner by all of its partners. In accordance with the corporate policy, we sell our products to reliable partners who regularly meet their obligations.

Fam officials said they contacted government authorities to complain Gazproms behavior. The government is bound to support us because it owns 99 percent of the companys shares, Petrovic said.

In any case, the state seems ready to move forward with Fams sale. Very soon we should appoint a privatization adviser, Dragana Puzic, project manager at the Serbian privatization agency told LubesnGreases in an e-mailed comment. She said that the agency expects the adviser to immediately start the process of requesting tenders from potential buyers.

Fam buys most of its paraffinic API Group I base oil from Hungarian oil company Mol. Nineteen rail tankers are always on standby, ready for the trip to Hungary. Occasionally Fam buys Group I from Italys Agip and ExxonMobil. It also uses smaller amounts of Group III base oils from Malaysian refiner Petronas.

In 2010 Fam produced 13,000 tons of finished lubricants. Output fluctuates from year to year, but officials said 2010 sales were the highest in five years. Management predicted sales would reach the same volume in 2011.

Serbias lubricant market consumed 45,000 tons in 2010, according to the countrys economic ministry, and Fam claims to hold a bit less than a quarter of that business. Another 25 percent is split by Nis and Modrica Oil Refinery, of Bosnia and Herzegovina, Fam officials said, while some 35 percent is taken up by imports from Total, Shell, ExxonMobil, Lukoil, and Bulgarias Prista Oil. The remainder is divided among quite a few small, independent producers or tollblended brands that appeal to customers looking for inexpensive lubes.

We think there are too many smaller manufacturers of low-quality motor oils and greases, Petrovic said. They are very small and each produces less than 1,000 tons annually, but their number is more than 20.

Fam exports around 35 percent of its total production, but foreign sales are not easy. There are significant differences in the ways that neighboring markets function, officials said. There is also stiff competition to cope with and pricing challenges resulting from exchange rates. Still, the Serbian company feels compelled to stay in the fray.

We are trying to enter the markets of Romania, Hungary, Croatia, Slovenia, as well as Kosovo, Macedonia and Bosnia and Herzegovina, and [companies from there] are trying to conquer our market, Petrovic said. Exports allow a big player in a small market to expand its potential customer base, he said, but cant overcome some problems such as a global recession.

When [domestic] industry is slowing down, our work is also slowing down, Petrovic said. The neighboring countries where we export are also prone to the crises, but our sales do not fall as fast there.

He also said that works with distributors and contracts consultants in order to reach sales targets abroad. We do products promotions but dont advertise. We are taking different sales approaches in every single neighboring market, as every country has its own specific qualities. Next year Fam will attempt to boost its exports in the neighboring countries, and to start exporting to additional nations such as Poland, Russia and Ukraine.

The companys history may encourage attention to foreign markets. There were times when it exported more than a half of its production, thanks to its wide assortment of finished products and brands. Our customers wont change suppliers, and many of them have cooperated with us since the early 1990s, Petrovic said.

Fam has evolved a lot since it was formed in 1966 when an edible oils processor and grease plant were separated from Merima, a chemicals company. The grease plant used fatty acids that were a by-product of the oils Petrovic said.

In the early 1970s Fam was able to hire around 40 technical specialists and skilled workers to develop its own motor oil brand. These were rough times when the ex-Yugoslavian market was occupied by the lube giant Ina, the Croatian refiner, back then known by his motor oil brand Delta, Technical Director Markovich said.

The companys golden years started in the 1980s when trade within Yugoslavia became more free and capital investments and cheap credits flowed from the institutions like International Monetary Fund.

Sales dropped when Yugoslavia began to collapse and its member republics descended into war. In 1999, the United Nations imposed sanctions against Serbia and Nato started a bombing campaign that damaged many industries, including the oil sector. Fam escaped without damage to its plant, but business shrank.

Today Fam produces around 360 lubricating products broken down into more than 900 stock-keeping units. It manufactures a wide assortment of engines oils and other fluids for automotive vehicles, and these are sold under its Fenix brand. The assortment includes synthetic and semi-synthetic motor oils, as well as mineral oils for diesel and locomotive engines.

It is hard for a small company to keep up with the development of lubricant specifications, Petrovic acknowledged. However, we dont lean only on the additives producers, but use our knowledge and experience gained during the companys four decades of existence.

The company produces 11 categories of industrial lubes including natural gas engines oils, air compressor oils, chainsaw oils, metalworking fluids and heat transfer oils. It also makes more than a hundred brands of lubricating greases and specialties. For example it produces special lubes for drilling equipment, wind turbines and constant-velocity joints, as well as biodegradable lubes.

Management is very proud that a big chunk of Serbian industry – from machine manufacturers and road builders to energy companies – is using Fams industrial oils. Around 60 percent of countrys overall industry uses our metalworking fluids, Markovich noted, adding that the company is providing technical service for the applications using Fams metalworking fluids and emulsions.

It is very important for the equipment to run smooth, he said. Furthermore, we provide collecting solutions for our customers waste oil fluids, which is also environmentally friendly, and we are the first one doing such service in Serbia.

Fam also produces its own additives such as corrosion inhibitors, viscosity regulators and foam stabilizers, additives for plastic explosives in the mining. In addition, it manufactures plastic containers ranging up to five liters in size, though it does buy some packages from Serbian suppliers. The company said that having its own packaging production is cost effective, allows it to make its own eye-catching designs while ensuring quality packages and also creates more jobs.

All in all it is a quite wide range of activities for a company that started out processing food oils. Fam has undergone remarkable evolution, and change seems to have been one of the few constants in its five-decade history. With the Serbian government looking to sell the company, it seems likely that its evolution will continue.