Analysts expect spending spree as Iscor bounces ba
Analysts expect spending spree as Iscor bounces back
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Trade and Industry Editor
STEEL group Iscor is expected to announce this week that it has shed the debt burden of recent years, and is ready to go on the acquisition trail.
Despite a depressed local market and fragile global steel prices, analysts believe Iscor could announce headline earnings for the year to June of as much as R2,5bn. The company's cash performance is also expected to be healthy.
Analysts believe the group will be able to report a cash pile of R500m after some spending commitments. This is on top of funding facilities of R4bn.
"The result is that if it judges the timing is right Iscor could embark on a massive spending spree," said an analyst at the weekend.
"There has long been talk of consolidation in the local steel industry, but when things were going reasonably well, the prices which Iscor had to pay were quite high. Now the steel cycle has dipped, and this improves the chances of Iscor buying what it wants for more attractive prices."
The immediate target is the Duferco steel-processing mill at Saldanha Bay, which is a 5050 joint venture between Duferco of Switzerland and the Industrial Development Corporation. Iscor has had its eye on the plant for a few years now, but has been unwilling to match the asking price.
Highveld Steel and Vanadium is another target, and it has had a poor six months to June, with an 80% slump in earnings.
"Again, it's a matter of price but Anglo owns over 80% of Highveld, and may feel that this asset is no longer a core part of its activities," said the analyst.
"There is no doubt that Iscor is a willing buyer, but does not want to have to pay too high a premium at a time when the global steel cycle is depressed."
Lakshmi Mittal's LNM, which owns 47% of Iscor , is believed to back Iscor CE Louis van Niekerk's desire for further consolidation in SA .
However, industry sources have suggested that the sale of Highveld might not be as easy a matter for Anglo as it might appear because Highveld is one of the world's major producers of vanadium. Anglo might not wish to sell only its steel assets, while on the other hand the inclusion of vanadium might complicate matters for Iscor.
Another hurdle might be opposition from the competition authorities, who might find it difficult to support the establishment of a virtual monopoly in the sector.
Aug 18 2003 07:19:48:000AM John Fraser Business Day 1st Edition
Monday
18 August 2003
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