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Gold/Mining/Energy : Harnischfeger (HPH) -- Ignore unavailable to you. Want to Upgrade?

To: robbie who wrote (12)	6/11/1999 7:04:00 PM
From: Allan	Respond to of 57

biz.yahoo.com ANALYSIS-Valmet-Rauma to gain from rival's woes By John Acher HELSINKI, June 11 (Reuters) - Finnish engineering group Valmet-Rauma stands to gain from the bankruptcy of its U.S. rival Harnischfeger, which could trim excess capacity in paper machinery, analysts said. Harnischfeger Industries (NYSE:HPH - news), the mining and papermaking equipment group, filed this week for Chapter 11 bankruptcy, struggling with a shortfall of working capital and hit hard by the Asian crisis that has knocked paper industry investment. ''If you look at the long term, then it seems that one major competitor is about to die,'' said analyst Markus Larsson at Handelsbanken. Valmet-Rauma's paper machine division Valmet has about a third of the world market for paper machines, versus one third controlled by Vienna-listed Voith Sulzer and a good 20 percent for Harnischfeger's Beloit subsidiary, analysts said. ''Valmet-Rauma and Voith are the two leading parties now,'' said analyst Mats Lindholm at Den Danske Bank. Harnischfeger on June 1 reported a loss of $74.3 million for the fiscal second quarter, with net sales up two percent year-on-year to $488.1 million, and said on June 7 it had filed for bankruptcy reorganisation. Its pulp and paper machinery division had a second-quarter operating loss of $24.96 million on sales of $193.79 million. At end-April, the debt-burdened company had long-term debt of $1.1 billion and current liabilities of another $1.1 billion, against shareholders' equity of just over half a billion. Its stock has plunged this year on the group's dire straits, with market capitalisation shrinking to a puny $66 million for a company with annual net sales of more than $2 billion. That compares with a market cap of 1.34 billion euros ($1.41 billion) for Valmet-Rauma with 1998 sales of 3.7 billion euros. In the first-quarter, Valmet-Rauma sank to a loss after financial items of three million euros ($3.14 million) from a pro forma profit of 46 million euros a year ago. Though poised to reap a windfall from Harnischfeger's troubles, Valmet-Rauma too has been hit this year by low investment in pulp and papermaking machinery. On Thursday it warned on 1999 profits and announced 2000 job cuts. Valmet-Rauma Chief Financial Officer Sakari Tamminen declined to comment on whether the company would be interested in buying Beloit. Analysts said it was unclear whether the bankruptcy meant Valmet's archrival Beloit was now out of the game altogether. In any case, withdrawal of Beloit from the business would not quickly end the troubles besetting manufacturers of pulp and paper machinery, including Valmet-Rauma. Analysts said that while Beloit could vanish from the new machinery market, where it has struggled, it could live off maintenance of installed Beloit machines for years or scale back to become a niche player, if creditors kept it in business. ''I don't think it will vanish from the face of the earth,'' Lindholm said. ''In the U.S. you can go belly-up under Chapter 11 and still stay in business -- it's new tricks, old dogs.'' Valmet-Rauma will surely watch closely where the bankruptcy proceedings take Beloit, and some analysts said it could be tempted to bid for it. ''What they could gain from Beloit would be its base of machinery to rebuild in the future and its customer base for maintenance services,'' Larsson said. But analysts agreed that Rauma-Valmet would not rush into bidding for Beloit or other parts of troubled Harnischfeger. ''I think they'll sit tight,'' Lindholm said. ''Technology-wise Valmet-Rauma has nothing to gain from Beloit, and they still have capacity themselves so they certainly don't need the extra plant capacity or staff.'' Lindholm added that in the long term Valmet-Rauma stood to gain from Beloit's possible withdrawal from the paper machine rebuilding market, where it has aggressively competed with Valmet for projects. Competition watchdogs would furthermore be aroused by any move by Valmet-Rauma to buy Beloit because a combination of the two would create a dominant market position, especially in the United States. A merged group would easily have a world market share of between 50 and 60 percent, and in some advanced paper machine lines the market share could climb over 80 percent in the United States, one analyst estimated. Voith would be the only serious competitor. Valmet-Rauma is the company being formed by the merger this year of paper machine maker Valmet and engineering group Rauma. The merger is due to take effect on July 1 and the company will be renamed Metso. ($1 equals .9530 Euro)