Avesta loses $37.8 million in quarter Swedish steelmaker to cut about 1,000 jobs


August 27, 1998|By BLOOMBERG NEWS

STOCKHOLM -- Avesta Sheffield AB, a Swedish stainless-steel producer, said plunging steel prices pushed it to a first-quarter loss and may force it to cut up to 15 percent of its work force.

The company, which announced the mothballing of its east Baltimore County plant in June, said its net loss was 314 million kronor, or $37.8 million.

The price of cold-rolled stainless steel, Avesta's main product, has fallen by more than a fifth in Europe in the past year, as cheaper exports from Japan and South Korea have flooded a market already awash in excess metal. Avesta, an affiliate of British Steel PLC, said it will lay off about 1,000 of its more than 7,000 employees over two years and streamline its organization.

"The European steel market is well into surplus, and my fear is that mills will have to be shut down," said Peter Fish, managing director of MEPS Ltd., a steel industry consultant. "There's a lot of steel around and it's sitting in the stockpiles of end users."

Cold-rolled sheets of stainless steel currently cost about $1,300 a metric ton in Europe, compared with $1,665 a ton in August 1997, according to Metal Bulletin Ltd.

"Sales prices are still under considerable pressure," Stuart Pettifor, chief executive, said in a statement. The company will reorganize, cutting up to 1,000 jobs over the next two years, Pettifor said.

Charges for the reduction in value of its inventories cut operating profit by 129 million kronor, while the closure of its Avesta Sheffield East Inc. plant in Essex cut profit by 332 million kronor, the company said.

Last month, the company agreed to pay back $600,000 of a $1.1 million economic development grant it received from the state on the promise that it would create new jobs.

Avesta spent $90 million to buy and refurbish the former Eastern Stainless Corp. mill, which once employed 1,500, and kept it operating for three years. But deteriorating market conditions dashed its hopes of increasing employment from 140 to 350, and instead jobs shrank.

Pub Date: 8/27/98

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