Raba-logo.gif” width=80>Raba Rt of Hungary has affirmed its status as the leading producer in the bus-and-truck sector in Eastern Europe, absorbing a heavy tab for repurchasing shares and restructuring operations to post its tenth-straight year of profit in 2000.


After-tax profit rose 22.5% to HUF3.461bn in 2000 from HUF2.825bn in 1999, while consolidated net sales rose 37.3% to HUF64.721bn from HUF47.147bn, the company said in a statement on 13 February 2001. (These preliminary results were prepared on Hungarian accounting standards, and Raba’s shareholders will vote to finalise them at their annual general meeting on 24 April 2001.)
















































































Raba Results (HUF m)
1999

2000

% Change
Profit – Operating
3,049

5,975

96.0
Profit – Pre Tax
3,574

4,283

19.8
Profit – After Tax
2,825

3,461

22.5
Profit – Retained
203

3,461

1604.9
Net Sales
47,147

64,721

37.3
Export
27,237

38,864

42.7
Domestic
19,910

25,857

29.9
Shareholder Equity
27,790

29,980

7.9
Provisions
737

260

-64.7
Liabilities
19,848

20,483

3.2
Accrued Expenses
524

327

-37.6
Assets – Fixed
22,255

23,092

3.8
Assets – Current
26,194

27,538

5.1
Assets – Accrued & Deferred
450

420

-6.7

SOURCE Raba Rt







Istvan Pinter –
Raba deputy chief executive










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From communism to capitalism…


“We enjoyed success even behind the Iron Curtain,” Istvan Pinter, Raba’s deputy chief executive, said at AUTOCEE2001, a conference on the auto business in Eastern Europe in Warsaw (23-26 January 2001). “But we still are adapting to the rigors of free markets. Since our privatisation in 1997, we have been attacking our bottom line, and we are changing our business model significantly to satisfy short-term and long-term investors.”


To reward stockholders, Raba paid a dividend per each HUF1,000-denominated share of HUF80 in 1999 (based on 1998 results) and HUF450 in 2000 (based on 1999 results). (The remit in 1999 was the first, since the company’s privatisation.) In its statement, Raba disclosed no plans for a dividend in 2001 (based on 2000 results), but the Budapest office of Dutch bank ABN AMRO Holding NV predicted a pay out of HUF150 per share (based on analysis before Raba released its 2000 results).


The Hungarian manufacturer said it expected moderate improvement in its financial performance in 2001 without detailing specific targets. ABN AMRO forecast Raba to earn HUF5.4bn in after-tax profit on revenue of HUF70.7bn.


Raba, based 120km west of Budapest in Gyor, works mainly in the commercial-vehicles world, supplying axles, chassis and engines for buses and trucks. Based usually on licenses, the company makes small volumes of buses, military and special vehicles, tractors and trucks. Axles are the forte, and Raba is the fourth-largest producer of them for heavy vehicles, among independent manufacturers (behind ArvinMeritor Inc of USA, Dana Corp of USA and ZF Friedrichshafen AG), Pinter said.








Overview of Raba headquarters







Axles core to Raba’s success

No irrational exuberance


A hallmark of its stability, the Hungarian company viewed its favourable results soberly, recognising the challenge to sustain its momentum. “We are… delighted to see (our plans) have been substantially exceeded,” Gyula Imre, Raba’s chief executive, said in the statement, noting operating profit last year was 8% above the company’s targets. “However, this is no time to celebrate. We must now prove that, by establishing cooperation with appropriate strategic partners, we are able to maintain… long-term dynamic growth…”


Indeed, net earnings could have been higher, given operating profit nearly doubled to HUF5.975bn in 2000 from HUF3.049bn in 1999. But Raba incurred extraordinary expenses of HUF2.875bn in 2000, up 191.5% on HUF986.3m in 1999.





























Raba Owners
% Stake
Gyor municipality
10.98
DRB-Hicom Group
10.37
European Bank for Reconstruction & Development
10.37
Raba treasury
10
Graboplast Rt
8.24
Menedzsment Befektetesi Kft
4.39
Others (none holding over 4%)
45.65

SOURCE Raba Rt

Cuts at the top


Nearly half of these costs, HUF1.416bn, went to buying back shares. But other losses were booked over rationalisations, including a 6.1% cut in employment to 7,047 in 2000 from 7,501 in 1999: reductions targeted corporate bureaucracy.


“We once had 800 people in headquarters, and management remained autocratic through the 1990s,” Pinter said. “We now have streamlined our central office into a tight group focused on strategy with only 50 people – including secretaries.”








“Raba has been the biggest exporter of a Hungarian manufacturer to USA since the end of Communism”



But the executive overhaul, highlighted by the resignation in 2000 of long-time president Barnabas Zalan, was only part of Raba’s fundamental transformation from a vertically-integrated giant with opaque structures to a holding company with legally independent subsidiaries.


This corporate reorganisation, essentially completed last year, has improved the efficiency and transparency of operations, while granting greater flexibility for Raba to pursue opportunities for its different divisions… Due to its diverse products, the company had hesitated to forge alliances, until its branches became separate shareholding units. As an axle partner effectively could be a competitor to an engine partner, Raba feared equity ties with one could jeopardise business with the other, especially if each collaborator would be an automaker… Conversely, many potential investors in Raba have been interested in only one part of the company. As an example, axle specialists have been wary of buying into all of Raba, averse to involvement in engines, vehicles, etc… Raba appears under no pressure to forge new strategic relations, but the holding company now has the latitude to sell stakes in individual subsidiaries without necessarily affecting the orientation of its overall ownership.





























































Raba Divisions Activity
Raba’s % stake
BPW-Raba Futomugyarto Kft production of axles
25
IMAG Kft production of seats
100
Raba Bastya Kft security services
100
Raba Futomu Kft production of axles
100
Raba Ipartechnika Kft engineering services
100
Raba Jarmu Kft production of vehicles
100
Raba Kispesti Ontode es Gepgyar Kft production of auto parts
100
Raba Motor Kft production of engines
100
Raba Sarvar Alkatreszgyarto Kft production of auto parts
100
Raba Szolgaltatohaz Kft business-support services
100
Raba-Detroit Diesel Magyarorszag Kft production of engines
50
Rabakesz Kft catering services
100
Rabatrans Kft logistics services
100

SOURCE Raba Rt

Brave new world


Raba has flourished by shedding its dependence on softer markets of the old East bloc, now generating over half of its income from developed economies. Customers have spanned: Europe (DaimlerChrysler AG, Irisbus Holding SL, AB Volvo); Japan (Isuzu Motors Ltd, Nissan Motor Co Ltd, Suzuki Motor Corp); South Korea (Daewoo Group, Hyundai Group); and USA (ArvinMeritor, Case of Fiat SpA’s CNH Global NV, Dana, Deere & Co, General Motors Corp, Marmon Group Inc).


Raba anticipates growing prospects in Western Europe for supplying components to automakers there seeking to divest from parts production. “European Union accession (for Hungary) is likely to further broaden these opportunities,” according to the statement.













































Raba Exports by Region ($m)
1999

2000

% Change
North America
74.4

69.6

-6.5
Europe – Southern & Western
19.2

30.3

57.8
Asia
8.1

22.4

176.5
South America
5.5

8.0

45.5
Europe – Ex-USSR
3.1

4.3

38.7
Europe – Eastern
2.0

4.3

115.0
TOTAL
112.3

138.9

23.7

SOURCE Raba Rt

Since the end of Communism, Raba has been the biggest exporter of a Hungarian manufacturer to USA with accumulated sales of $1.5bn since entering the market in 1974. But its annual turnover there, over $100m from 1995 to 1998, dropped to $74.4m in 1999 and $69.6m in 2000, aggravated by a 19.6% contraction in demand last year for heavy vehicles (mainly Class 7 and Class 8 trucks), the company said.


However, Raba is bolstering foreign sales with bold forays into emerging markets like Iran, where its turnover in 2000 approached $20m to VAM Co, a state-owned maker of bus and truck axles.


Axles drive Raba


The Hungarian company exported to 40 countries in 2000, but its main product in most places is axles, accounting last year for 46.4% of sales and 103.9% of pre-tax profit.















































Raba Sales by Activity (HUF m)
1999

% of Total

2000

% of Total
Axles
27,185

48.9

37,110

46.4
Auto parts
11,513

20.7

16,607

20.8
Vehicles
4,642

8.4

5,975

7.5
Engines
4,145

7.5

5,310

6.6
Other
8,066

14.5

14,980

18.7
TOTAL
55,551

100.0

79,982

100.0

SOURCE Raba Rt

Axle technology is increasingly expensive and sophisticated, but Raba continues to innovate. It has been developing axles for special-purpose vehicles, and it is selling a new design of wet-brake machine axles to several customers in Western Europe.




































































Raba Results – Business Units (HUF m)
Axles

Auto Parts

Engines

Vehicles

Other
Profit – Operating
5,464

682

491

87

-474
Profit – Financial
-686

-225

-32

-41

1,292
Profit – Ordinary
4,778

457

458

46

818
Profit – Extraordinary
-328

-115

-76

-4

1,040
Profit – Pre Tax
4,450

342

382

42

1,858
Net Sales
37,110

16,607

5,310

5,975

14,980
Export
31,202

4,565

1,194

34

1,868
Domestic
5,908

12,042

4,116

5,940

13,112

SOURCE Raba Rt

Output of engines and vehicles, though unlikely to return to artificial highs under the planned economy of the Soviet era, is growing moderately, and prospects could brighten. Raba is seeing a surge in demand throughout Eastern Europe to replace its ageing motors, notably in Romania and former Yugoslavia.


As Hungary now belongs to the North Atlantic Treaty Organisation (NATO), Raba expects significant business in fulfilling orders for military vehicles from the country’s ministry of defence. On 26 February 2001, the company said it qualified for the second round of a ministry tender for 12,000 vehicles worth HUF250bn-HUF300bn over 15 years, according to a dispatch from Reuters in Budapest. “We think we stand a good chance of winning between 50% and 80% of the total business,” Imre reportedly said. Raba, which earlier stated it agreed to work with DaimlerChrysler in its bid, expected the ministry to announce a decision in second-half 2001, according to Reuters.








Raba eyes NATO orders







Raba bus on streets of Budapest

The military tender represents merely one of many prospects for making over the profile of Raba’s divisions for vehicles as well as engines, Pinter said. “We are developing strategies for these units to unlock their potential value,” he said without elaborating.


Parts of the story


Developments in auto components may centre around IMAG Kft and Raba Sarvar Alkatreszgyarto Kft. IMAG (Ikarus Mori Alkatreszgyarto) makes cables and seats, delivering the latter to Suzuki’s car factory in Esztergom, Hungary. Sarvar produces a variety of parts, including axle elements, brake pedals and throttles; its customers include the Suzuki site plus the Polish plant of GM’s Adam Opel AG.


“We see good opportunities in auto parts,” Pinter said. “This division provided $61.8m of our sales last year, over 20% of our revenue. We expect it to become increasingly important, and we are working hard to improve our competitiveness here.”


The company, whose full name is Raba Magyar Vagon -es Gepgyar Rt (Raba Hungarian Carriage and Machine Factory PLC), is the only big player in the bus-and-truck sector in the old East bloc to have rebounded from the end of Communism. Behemoths like AO KamAZ and OAMO ZiL of Russia continue to languish with outdated products and over-capacity. But Raba has dramatically modernised, cutting nearly half its workforce and reinvesting earnings into equipment, technology and training.


EBRD.gif” width=200>Raba’s biggest shareholders are: Gyor municipality (10.98%); Malaysian conglomerate DRB-Hicom Group (10.37%); European Bank for Reconstruction and Development or EBRD (10.37%); Raba’s treasury (10%); Hungarian textile manufacturer Graboplast Rt (8.24%); and Menedzsment Befektetesi Kft or Management Investment Ltd (4.39%). No other owners hold over 4%. (First Hungary Fund Ltd of Jersey in the UK Channel Islands sold its 10% stake to Raba last year.) The remaining shares have been floated on the Budapest Stock Exchange.


Exchange rate: $1=HUF292.







Contact Ryan James Tutak, associate editor of just-auto.com for Eastern Europe:
E ryan.tutak@just-auto.com
F +36-1 / 317-7257
T +36-1 / 266-2693