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Vitro focuses on glass

What do you get when you strip away Mexican manufacturer Vitro SA“s home appliances division? Possibly the world“s sixth-largest glassmaker carrying a whole lot less debt. Vitro was due to revise th…

What do you get when you strip away Mexican manufacturer Vitro SA“s home appliances division? Possibly the world“s sixth-largest glassmaker carrying a whole lot less debt. Vitro was due to revise the terms of its 17-year joint venture with Whirlpool Corp. by the end of the year. But as Vitro has promised to focus on core businesses and chip away at its US$ 1.65 billion debt load, the company decided now was a good time to sell its 51% stake in the venture. The deal was announced on 25 February. The Whirlpool-Vitro joint venture had annual sales above US$ 600 million, having sold thousands of small refrigerator units and gas ranges in 2001. Factoring in all the sales, Vitro has settled into three core businesses: glassware, glass containers and flat glass. As recently as 1995 Vitro was spread out across 28 different business lines. The financial community has been strict with Vitro since the company bit off more than it could chew in recent years through acquisition binges. Credit ratings agency Standard & Poor“s said it“s keeping a close eye on Vitro, whose credit it rates single-B-plus with a negative outlook. Vitro is hoping the Whirlpool sale will help it increase its rating up four notches to investment grade in 2003. The company would also like to issue a new bond. Belt tightening was the trend for much of 2001. Vitro rounded up US$ 65 million by divesting unnecessary assets such as corporate jets. The company also laid off 1,000 executives for an annual savings of US$ 35 million. These moves, however, didn“t stop the company from expanding in its core business areas. Vitro announced plans in November to revamp an idle plant in the border city of Mexicali. The former bottle plant in Mexicali is destined to churn out flat glass, which offers favorable margins. AFG Industries, Inc., the US subsidiary of Japan“s Asahi Glass Company, is expected to commit US$ 45 million to convert the plant. Vitro expects its cash contributions to the 50-50 venture to be small since it is providing the infrastructure and about US$ 17 million worth of equipment. The flat glass will head mostly to the US and Canada, like many of Vitro“s products. Roughly 45% of Vitro“s 2001 sales came from exports, and dollar-denominated sales made up 70% of Vitro sales.

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