Ispat International Subsidiary Pockets Two German Firms

A Dutch subsidiary of the Lakshmi N Mittal (LNM) Group has acquired two German companies.

Ispat International N V confirmed that it had completed the acquisition of Stahlwerk Ruhrort GmbH (SRG), a steel maker based in the Ruhr, and Walzdraht Hochfeld GmbH (WHG), a wire-rod manufacturer located in Duisburg. Both SRG and WHG belonged to the Thyssen group, a leading German industrial group. The turnover of the two German companies, which have a combined annual raw steel production of 1.5 million tonnes, is estimated at 1.2 billion German marks. The two companies will be managed by Ispat.

The brain behind the takeover is 47-year-old Indian businessman Lakshmi N Mittal, chairman and CEO of the LNM Group. Mittal said the acquisition of the two German companies will enable the LNM Group to achieve market leadership in the long-product market in Germany and strengthen its position in the higher value-added wire rod market in Europe.

 

"Our group has grown rapidly to become the world's only truly global steel conglomerate with a worldwide workforce of 70,000 and net sales of $2.72 billion in 1996," a spokesperson of the LNM Group said. The acquisition of the German companies, along with its existing operations in Netherlands, Germany, Trinidad and Canada, will strengthen the LNM Group's position as one of the world's largest wire-rod producers.

For some reason, however, Mittal has so far shied away from acquiring ailing Indian companies. He said he would consider acquiring Indian companies and has been receiving many proposals from India. Although the acquired plants lost over $38 million for the year ending September 1997, a number of cost reductions that are in place or planned, together with improved pricing should ensure that the operation is solidly profitable next year.

Mittal said there was a "sense of consolidation" in the European steel industry and that he saw "good potential in the long product division." He pointed out that some of the products manufactured at the WHG command premium of up to $245 over rebar. Overall, prices of long products in Europe have picked up and the company expects 1998 to be a good year.

The companies in the LNM group, of which Mittal is the controlling shareholder, include Ispat International N V, Ispat Karmet and Ispat Indo. Although steel manufacturing remains the group's mainstream business, Mittal has been diversifying operations into shipping and has ventured into coal, power and oil in Kazakhstan.

Ispat Indo in Indonesia was Mittal's first venture. A single-site rod mill established as a greenfield project in 1976, Ispat Indo later became the country's largest privately owned steel company. Its success helped establish a platform for rapid global expansion in the steel industry, which until then had been almost entirely national. This led to the creation of one of the lowest cost and the fastest growing steel producing mills of the world.

Ispat Karmet in Kazakhstan is one of the largest single-site steel plants in the world with an annual capacity of six million tonnes. According to the Ispat spokesperson, Ispat International N V, the world's fastest growing steel company, is also the world's largest producer of steel using the integrated mini-mill process.

The company's net sales for 1996 amounted to $1.77 billion, and net income was $613 million. With the current market capitalisation of about $3.6 billion, it is the second largest steel company quoted on the New York Stock Exchange and has a dual listing on the Amsterdam Stock Exchange.

"At Ispat International N V, my strategy was based on a growth formula of acquisition and internal expansion, placing emphasis on the use of internally produced direct reduced iron or "DRI," as a scrap substitute," Mittal observed.

Mittal's ability to guide Ispat International N V in its identification, acquisition and turnaround of under-performing integrated mini mills has led to its emergence as the world's largest producer of steel using the Direct Reduced Iron (DRI) - Electric Arc Furnace - Continuous Casting Method. "Ispat International is now the largest DRI producer in the world," Mittal said. He said that a significant portion of all the LNM Group production is exported. Ispat Karmet in Kazakhstan currently contributes about 15 per cent of Kazakhstan's GDP and Ispat Mexicana is Mexico's largest steel exporter. (IANS)

With his philosophy that "enterprise knows no boundaries and can root anywhere in the world," Mittal's business strategy has been to focus on producing low cost, value added steel products using leading edge production technology. All the Ispat facilities have been given the ISO 9002 certification.