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Slovak steel VSZ's losses seen continuing

Slovakia's biggest steel maker , VSŽ a.s., could continue to make losses at least into the second quarter of this year, equity analysts said on May 6. Earlier in the day, VSŽ posted a first quarter net loss of 1.359 billion Slovak crowns ($32.6 million) for the first three months of 1999, after posting losses of 11.059 billion for the whole of 1998. Official comparative figures were not immediately available.
"It can't be that easy for a company of VSŽ's size to reverse the negative trend," Miroslav Nosal of Merril Lynch told Reuters.
"The first quarter loss is not a surprise, and I would not be surprised if the company stays in the red also in the next quarter of the year," Nosal added.

Slovakia's biggest steel maker , VSŽ a.s., could continue to make losses at least into the second quarter of this year, equity analysts said on May 6. Earlier in the day, VSŽ posted a first quarter net loss of 1.359 billion Slovak crowns ($32.6 million) for the first three months of 1999, after posting losses of 11.059 billion for the whole of 1998. Official comparative figures were not immediately available.

"It can't be that easy for a company of VSŽ's size to reverse the negative trend," Miroslav Nosal of Merril Lynch told Reuters.

"The first quarter loss is not a surprise, and I would not be surprised if the company stays in the red also in the next quarter of the year," Nosal added.

VSŽ, which accounts for some seven percent of Slovakia's gross domestic product and 10% of exports, ran into trouble after failing to meet a $35 million payment on a syndicated loan in October. Radical personnel changes were made in management in November and the new management has said it is holding talks with several foreign steel companies.

VSŽ President Gabriel Eichler said in March that USX Corp's U.S. Steel was seriously interested in investing in the company.

The company has also been focusing on shedding its non-steel related assets and collecting overdue claims.

"The first quarter loss resulted mainly from exchange rate losses... If we take into account only operating profit, than we would see no significant change from last year's first quarter," said Roman Matis of J&T securities. "The company has been operating at around 60% of full capacity since the beginning of this year, and the world prices of steel are even lower that the year before," Matis said.

He said he estimated VSŽ's exchange rate losses in the first three months of this year at roughly one billion crowns. "This is where, in my opinion, the overall loss came from," he said.

In March, VSŽ said it had reached a standstill agreement with its creditor banks, which also granted it new loans of $50 million.

"We cannot say the new management is not doing well," Merrill Lynch's Nosal said. "In theory, an almost pure exporter such as is VSŽ, should profit from the easing of the currency," Nosal said. "But it will take longer to have an effect, and it depends on the type of contracts VSZ has with recipients abroad."

The company's stock, once the most liquid on the Bratislava Stock Exchange (BSE), has fallen by more than 50% to 150 crowns per share from around 350 crowns after the financial problems came to light last October.

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