Schmolz Examines Options for German Distribution Unit in Revamp

Schmolz & Bickenbach AG will focus more strongly on steel-production units to help improve earnings by 230 million euros ($303 million) and said it will examine strategic options for the German part of its distribution business.

Schmolz, based in Emmenbruecke, Switzerland, said in a statement its growth and profitability program covers all areas of the business and forecast about 100 million euros in cost reductions and efficiency gains. As a result of the revamp, Schmolz will have earnings before interest, taxes, amortization and depreciation of more than 300 million euro by 2016, it said.

“In light of the depressing underlying fundamentals in Europe the cost measures are highly welcome,” Patrick Rafaisz, an analyst at Bank Vontobel in Zurich, said in a note to investors. “Margins could prove better than assumed today if Distribution is being scaled down.”

The Swiss steelmaker last week rejected a proposal for a 434 million-franc ($462 million) capital increase from its main shareholder, Schmolz & Bickenbach GmbH & Co. KG, and Russian billionaire Viktor Vekselberg’s Renova Group and proposed a smaller share sale of 330 million francs instead to shore up finances.

Schmolz’s loss-making distribution unit contributed 1.3 billion euros to a total of 3.6 billion euros in sales last year. The company was founded in 1919 and operated as a steel trader before expanding into manufacturing. The group employs around 10,000 people of whom 2,369 work in the distribution unit, which offers consulting, post-processing and delivery services related to steel orders.