VSŽ steel giant reveals massive losses

Slovakia's largest industrial company, steel maker VSŽ Holding, reported a consolidated gross loss of 3.6 billion Sk ($95.36 million) in the first eleven months of 1998 and is planning to sell off non-steel making assets from football clubs to corporate jets.
VSŽ, which accounts for 7% of Slovak gross domestic product and 10% of exports, was closely associated with the previous government of Vladimír Mečiar. The scale of the company's problems became clear shortly after Mečiar lost power at the end of September when VSŽ failed to pay back in time a $35 million syndicated loan arranged by Merril Lynch.


VSŽ president Gabriel Eichler revealed at a February 9 press conference that his company would make a loss of around 5 billion Slovak crowns for 1998 after showing a profit for 1997. The steel giant is now focused on cutting its losses by selling off non-core businesses.
photo: TASR

Slovakia's largest industrial company, steel maker VSŽ Holding, reported a consolidated gross loss of 3.6 billion Sk ($95.36 million) in the first eleven months of 1998 and is planning to sell off non-steel making assets from football clubs to corporate jets.

VSŽ, which accounts for 7% of Slovak gross domestic product and 10% of exports, was closely associated with the previous government of Vladimír Mečiar. The scale of the company's problems became clear shortly after Mečiar lost power at the end of September when VSŽ failed to pay back in time a $35 million syndicated loan arranged by Merril Lynch.

Company president Gabriel Eichler told journalists February 9 that VSŽ would probably post full year 1998 losses of 5.0 billion Sk ($132.45 million) after posting a pre-tax profit in 1997 of around 600 million Sk.

"They are in line with our expectations...After the default we estimated the loss at 2.2 billion Sk but that was before provisioning for bad receivables," said Roman Matis of J&T Securities.

Eichler said the sheer size of the company - it has 128 subsidiaries - was a major problem and that all sections of the business unconnected with steel making would be sold off. "The greatest problem was putting together reliable numbers," he said. "We cannot afford to keep any subsidiary that doesn't belong to the steel making business... We have prepared a programme of sales."

Top Czech soccer club Sparta Prague and a slew of company cars and jets were definitely among those assets earmarked for sale, he said.

VSŽ was, as widely rumoured, holding talks with potential strategic partners but Eichler would not name any except for ISPAT International and U.S. Steel, with which VSŽ already has a joint venture project.

Eichler said VSŽ had been completely unprepared for the downturn in the world price of steel last year and that this had contributed to poor performance. He expected steel prices to pick up in mid-year.

Another major problem was company indebtedness. Eichler said that at the end of 1997 the company owed 4.7 billion Sk in overdue receivables, a figure which had now fallen to around 4.0 billion Sk. VSŽ itself was owed 8.5 billion in overdue receivables.

"If we manage to halve our overdue receivables we could pay back all of our own overdue debts," he said.

Company officials said that VSŽ would sell off the Czech Republic's top soccer club, AC Sparta Praha, and that plans for the sale would be drawn up in the next few weeks. The eastern Slovak company bought Sparta in 1996 for one billion Slovak Sk ($26.5 million).

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