Aug. 26, 2010 - Magnesita, controlled by GP Investimentos, may join the Austrian RHI and form the largest refractory (material used in blast furnaces for steel and cement) in the world.
Currently, Magnesita, who for decades belonged to the family Pentagna Guimar es, is the third largest in the global ranking, behind only the very RHI and Belgian Vesuvius.
The association with RHI is part of the plan of Magnesita of becoming the world number one by 2012. According to a senior executive of the company, partnered with RHI follows market logic: the Austrian company has little penetration in Brazil, but has begun to act more aggressively in the country in recent months, Magnesita wants to expand its operations in Europe - a market that still walks more slowly due to the economic crisis on the continent. In contrast, the Brazilian market is heated, so that Magnesita works full load.
Resignation
On Friday, the president of RHI, Thomas Fahnermann, stepped down after the company's board refused to approve a large investment in Brazil. "This creates an opportunity for agreement, as the council has not approved investments in the country, forcing the departure of president. They have little power here and we want Europe ", says the executive.
From reading the Magnesita, Fahnermann's resignation means that the RHI is not intended to compete directly with the Brazilian company in the domestic market, paving the way for the partner. But still no deadlines. "I always prefer the option to purchase and have $ 500 million in cash. But this does not preclude a partnership, "he says.
Magnesita was one of the Brazilian companies most affected by global economic crisis since the national steel even decreased by 50% the production of steel - and the company had bought the German LWB competitor for $ 1.6 billion. Sales and production of the company plummeted. Staff were laid off.
Now, with a pickup in the economy, the scenery starts to turn. Magnesita managed to reverse losses, expansion plans and had net income of $ 24.6 million in the second quarter, with net income of $ 51.7 million. In the first half, net income totaled R $ 1.1 billion, up 23.5% compared to the same period last year. The sales volume of refractory maintained an average of 78 000 to 80 000 tonnes per quarter. "I've put over 500 employees throughout Latin America and Brazil, companies like Usiminas and Arcelor," says the executive.
Prices
Before the departure of Fahnermann, RHI has come to bother the Magnesita in Brazil. Another source of the company, Magnesita had to lower prices to stop the arrival of competition. "The reaction generated an impact on financial results, which could be better," says the source. The departure of the chairman of RHI may signal that the company prefers not to go up against the Magnesita in the country.
