Amtel-Vredestein Sales Up but Debt Issues Remain

Figures released by Amtel-Vredestein for the first nine months of 2007 show increased net sales during the period, however a statement released by the company on January 29 also points to the possibility of supply disruptions resulting from difficulties in refinancing short-term debt.

For the nine months ending September 30, 2007 sales rose by 26 per cent to US$691 million, from $548 million for the same period in 2006. From this figure, sales for the company’s Russian operations (excluding the AV-TO unit) increased 18 per cent to $274.3 million, while European sales from Vredestein Banden B.V. grew 20.1 per cent to $275.4 million. Much of Amtel-Vredestein’s overall sales growth has taken place, the company reports, through increased sales at its AT-VO unit due to the acquisition of tyre and automotive parts wholesale businesses Pigma and Megashina, and the increased number of retail stores included in the consolidated results.

Throughout this nine-month period some 10.5 million passenger car tyres were sold, a rise of 16.7 per cent on 2006. A breakdown of this figure into respective segments reveals the sale of 3.5 million “A” segment premium tyres (3.2 million in 2006), 4.8 million “B” segment tyres (4.5 million in 2006) and 2.2 million “C” segment budget tyres (1.5 million in 2006). The overall sale of passenger car tyres amounted to a sales revenue of $414.1 million, 59.9 per cent of total sales in the period and a 24.7 per cent higher figure than the first nine months of 2006.

Also up, however, was company debt – from $820.4 million to $869.6 million, an increase of 6 per cent. The rise in debt levels as of September 30, 2007 was, the company reports, largely due to a foreign exchange effect – most of its loans are in roubles and euros, which respectively increased by 3 and 5 per cent against the US dollar during the third quarter. The AV-TO unit, while contributing to increased sales, also added to the company’s losses.

In a previous results statement issued in October the company reported difficulties in refinancing some of this short-term debt. Amtel-Vredestein’s January 29, 2008 statement show this issue remains outstanding: “The company continues to experience these difficulties and in funding its working capital and capital expenditure needs, increasing the risk of supply disruptions.” The company reports it is in “ongoing negotiations” to arrange interim financing, and Rothschild has been appointed to assist in the development of Amtel-Vredestein’s plans to reorganise a “substantial part of its debt”, a measure necessary to ensure current and long-term obligations can be met.

Projected whole year sales for 2007 are $980 million and Amtel-Vredestein says it “plans to be operationally profitable for the year”.