Struggling Austrian insulation and fireproof goods maker RHI AG may have ensured its survival by deconsolidating its US subsidiaries, but it“s expected to be some time before shareholders see the ben…
Struggling Austrian insulation and fireproof goods maker RHI AG may have ensured its survival by deconsolidating its US subsidiaries, but it“s expected to be some time before shareholders see the benefits, analysts said in January. With the downturn in the steel industry, RHI faced difficulties in the US market throughout 2001. This was then exacerbated by a soaring number of asbestos claims in the US, which has brought RHI close to insolvency. The US deconsolidation will be combined with a capital restructuring programme, but analysts said it could be three years before investors benefit. RHI“s shares dropped 39% in the first two weeks of 2002 as its financial problems have become evident, and the stock continued to fall even after the restructuring plans were announced. At 1340 GMT shares were down 2.7% at EUR4.35. Traders say shares are strongly supported at EUR3.00. However, analysts don“t see a significant rebound until the company has evidence that its remedy is working. RHI“s new chief executive, Helmut Draxler, said at a recent news conference he is convinced RHI will return to an operating profit in 2002, following an expected net loss of EUR 870 million in 2001. Chief Financial Officer Eduard Zehetner said he expects RHI to report 2002 sales of EUR 1.4 billion and operating profit of between EUR 56 million and EUR 70 million. The number of compensation claims has doubled from 200,000 to 400,000 at RHI“s US units alone from last year to this year, and settlements have also doubled to around US$ 3,000 from US$ 1,500, Draxler said. But key to a return to profit will be the agreed refinancing package with RHI“s main creditor banks, which it owes some EUR 1.1 billion. Christian Bada, an analyst at Deutsche Bank, said this also means that everything RHI earns will go to the banks, while shareholders won“t see any money for the next three years at least. Bada has an underperform rating on the stock. The refinancing package involves the release of revenue and capital reserves amounting to about EUR 400 million and the conversion of liabilities to banks totaling EUR 400 million into subordinate mezzanine capital, free of interest and repayment for five years. In addition, RHI will issue a subordinate convertible bond amounting to more than EUR 144 million.