The developments on the international steel market have turned Sidex Galati into a more profitable business than expected by the Indians at LNM Holdings when they bought the plant in November 2001.
After the privatisation of the plant, completed thanks to a number of concessions (tax exemptions, payment of compensations for those laid off) from the Romanian State, the price of steel has gone up some 40%, recently peaking at $400/tonne, a thirty-year high.
The rising prices, which had already helped Sidex turn a gross profit of $84 million in mid last year (from $462 million loss in 2001), do not seem to stop, given the demand from the Chinese market that is only getting stronger.
"There are certain product categories we used to sell for $160-$200/tonne two years ago and are now worth $300/tonne. The price of certain raw materials has gone up, too, but we estimate we will see profit up this year, as well," Narendra Chaudhary, Sidex Galati general manager and LNM's representative in Romania said.
Sidex' financial reports for 2003 have not been completed yet. The managers of the plant, however, were expecting Sidex to post turnover up from the $880 million in 2001 and the $1bn in 2002. The increasing demand for steel on the international market will allow Sidex to boost production again this year. The plant will be making some 5.2 million tonnes of steel in 2004, Chaudhary says, compared to 3.1 million tonnes in 2001 and 4.5 million tonnes in 2002.
At the time of privatisation, Sidex was deemed by the representatives of the State as "the black hole" of the Romanian economy and as a company that simply was not possible to manage in such a way that it would turn a profit. LNM will invest, as its general manager says, more than $100 million in Sidex this year, the same as in 2003. The money will be used to upgrade certain pieces of equipment and to continue the upgrade of other installations. Part of the investments will be directed to environmental purposes.
Back when it bought Sidex, LNM pledged to invest $451 million to retool the plant. The takeover of Sidex, that is the actual purchase of the shares held by the State, only cost LNM $70 million.
The rejuvenation of the international steel market has boosted LNM's appetite for investment in Romania. LNM last year bought Tepro Iasi and Petrotub Roman and will finalise the acquisition of Siderurgica Hunedoara this year.
The takeover of Petrotub was completed last December and LNM's representatives say the Indian group will invest over $80 million in the pipe maker.
laurentiu.ispir@zf.ro
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