Steel firm posts loss amid power squabble

Schmolz + Bickenbach CEO Johannes Nonn has to announce a first-half loss Keystone

Embattled Swiss-German steel company Schmolz + Bickenbach has posted a €18.9 million (CHF 23.2 million) loss in the first half of the year, weeks before an extraordinary general meeting to determine the future of the firm.

The highly indebted company has been embroiled in a bitter ownership dispute in recent months that has pitted the group’s board against founding family descendants, who have supported a hostile takeover bid by Russian billionaire Viktor Vekselberg.

Vekselberg looks set to win the argument at the firm’s EGM on September 13 and add the specialist steel products manufacturer to his growing list of Swiss industrial concerns, that already includes Sulzer and Oerlikon.

The 94-year-old firm ran into trouble last year racking up debts of more than CHF900 million as demand fell in its key European markets.

A bid to raise cash from new investors led to a row between the company board and founding family members over the scale of the rescue capital that is needed. The board put forward a plan to raise CHF330 million while the family – who controlled 40 per cent of the company – insisted on a sum of CHF430 million.

High stakes

Enter Vekselberg, and the Venetos subsidiary of his holding company Renova, signaling that he would back the family proposal in exchange for more shares in the company. A bitter annual general meeting in June saw the motion defeated – but only temporarily, it appears.

Vekselberg, who caused waves with the bitterly contested takeover of Swiss industrial giant Sulzer in 2007, then upped the stakes by taking over half of the family’s shares, triggering an automatic bid for the entire company under Swiss law.

A token bid, that valued the company far below its market value, was rejected by Schmolz + Bickenbach on August 5. But eight members of the company’s board, including chairman Hans-Peter Zehnder, had already admitted defeat by this time, vowing to step down at the EGM.

The decision has paved the way for Vekselberg to take control of the company’s future on September 13, with few precise details of future strategy being announced.

“Little is known about Renova’s precise intentions with regard to exercising this control,” the company said in a statement last week as it rejected the takeover bid.

Hard times

In another twist, Schmolz + Bickenbach major shareholder and board member Gerold Büttiker has issued a formal complaint with the Swiss Financial Markets Supervisory Authority (Finma) about alleged procedural shortcomings in the failed takeover bid. Finma would not comment on ongoing investigations.

The markets would welcome a resolution to the dispute and a clear decision on any capital injection, according to Zurich Cantonal Bank analyst Martin Schreiber.

“There was quite a personal fight between the company board, the founding family members and certain shareholders over the last few weeks,” Schreiber told swissinfo.ch. “But they now seem to have found some sort of settlement.”

“The company has agreed to a new shareholder structure that seems to offer more stability.”

In the meantime, the company has embarked on a restructuring and cost cutting strategy that realised savings of €35 million last year, with more to come in 2013. But this did not stop net profits falling from a gain of  €15.8 million in the first half of last year to a loss of €18.9 million in the first six months of 2013.

Schreiber believes the company could be facing more difficult months ahead until an expected upturn in fortunes.

“The company has been operating in a very difficult environment with falling sales and commodity prices,” he told swissinfo.ch. “I would expect the rest of this year to be hard with growth maybe returning next year.”