Austria’s bit player is a rock-solid competitor

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Series Details Vol 7, No.10, 8.3.01, p21
Publication Date 08/03/2001
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Date: 08/03/01

THE Austrian government will keep the 'Not for Sale' sign firmly nailed to VAStahl, the country's largest steelmaker, as NewCo's rivals cast around for take-over targets.

VAStahl is one of the most profitable players in a low-margin business, but the government's 39% stake makes it a highly illiquid stock and safe from predators. Vienna says it intends to hold onto 25% for the next two years which means some of its stock will come to market, providing an opportunity for European or even Japanese steelmakers to come on board.

VAStahl is a high-quality niche steelmaker with long-term contracts with blue-chip customers such as German automaker BMW accounting for some 60% of its sales. And that makes it financially stronger than its larger European competitors. It has a 5.64% operating margin compared with Usinor's paltry 1.99%, Aceralia's 3.41% and Arbed's 3.97%. It made a pre-tax profit of €163.9 million on sales of €2.7 billion in the year to 31 March 2000, and analysts are forecasting a €220-230 million profit for the current financial year.

VAStahl is a bit player producing barely a tenth of NewCo's production. But it more than makes up for this with a 5% share of carbon steel and galvanised steel products markets and a diversification into higher-margin added value sectors such as tubes, rails and wires. It is also moving beyond steel manufacture into engineering services. And that makes it a model European steelmaker.

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