Skip navigation
Newswire

UPDATE 3-Colombian Valores Bavaria cuts 2002 loss by 50 pct

(Recasts with details, background)

By Phil Stewart

BOGOTA, Colombia, Feb 28 (Reuters) - Colombian conglomerate Valores Bavaria said on Friday it slashed its 2002 losses by about 50 percent from the previous year, and pledged a quick return to profitability as it sheds domestic assets and expands abroad.

Valores, controlled by Colombian magnate Julio Mario Santo Domingo, is considered a bellwether of the Colombian economy with interests in businesses ranging from supermarkets to television to flagship airline Alianza Summa.

"The investment portfolio of Valores Bavaria is more healthy and already more profitable than it was one year ago," said the company's president, Javier Aguirre, as he shuffled through a list of 2002 asset sales including a domestic auto assembly plant and a major Colombian fast food chain.

"We are slightly ahead of schedule," he told reporters.

Valores losses last year totaled 488 billion pesos ($165 million), compared with 958 billion pesos ($324 million) in 2001. Aguirre forecast the conglomerate's losses would further fall in 2003 to about 240 billion pesos.

The drive to regain profitability, which Aguirre said might come as soon as 2004, follows Santo Domingo's decision to divorce his cash-cow, brewer Bavaria , from the conglomerate two years ago. The separation left Valores hobbled, and the firm is struggling to walk again.

Aguirre explained part of Valores' strategy was to scale back its debt load, which stood at more than $250 million in 2002. It made $71 million in advanced payments on 2003 and 2004 debt to head-off losses in the next two years.

At the same time, Valores has said it is looking to expand abroad as it attempts to hedge against economic troubles in Colombia as well as fallout from the Andean nation's four-decade-old guerrilla war.

SINK OR SWIM

On Feb. 19, Valores said its Caracol Television media subsidiary, along with two Peruvian newspaper firms, would jointly buy a controlling stake in Peru's largest television company, America Television. The companies won the stake by agreeing to assume 55 percent of America Television's debt with its principal creditors.

The decision to expand in Peru came as Valores scaled back its presence in radio networks in Colombia, most of which Aguirre said Valores was "getting out" of in the near future.

Last year, Valores sold its interests in Colombian fast food chain Presto, the Sofasa auto assembly plant and a private security service called Vise.

Santo Domingo's sink-or-swim attitude toward Valores also forced the conglomerate to transform the country's oldest national daily into a weekly newspaper to reverse losses.

Aguirre said the conglomerate would like to turn El Espectador newspaper -- the former stomping-grounds of Nobel prize-winning author Gabriel Garcia Marquez -- back into a daily. But Aguirre was cautious as he painted a gloomy outlook for Latin America's fifth largest economy.

Colombia's economy grew just 1.65 percent last year, and the government forecasts a meager uptick this year with an expansion of just 2 percent of gross domestic product. The country's conflict claims thousands of lives a year and increases the cost of borrowing for local businesses.

Foreign investment in Colombia has also ebbed.

"Foreign direct investment in Colombia ... has fallen practically by half over the past two years. Unfortunately, we are expecting it to continue falling," he said.

Continuing to trouble Valores Bavaria is its telecommunications and commercial airline interests.

BellSouth Colombia, a venture between Valores and BellSouth Corp. , dragged down Valores' 2002 results. The firm lost 404 billion pesos last year ($136 million) and Valores had to pay 102 billion pesos ($34.5 million) in amortizations.

Valores also decided to pay forward $71 million in upcoming BellSouth Colombia amortizations for 2003 and 2004.

Also weighing on the conglomerate is loss-making Alianza Summa, which is the result of the merger of Colombia's two largest airlines Avianca and Aces. Valores previously owned Avianca and a has 50 percent stake in Alianza Summa. It bet another 104 billion pesos ($35 million) on the carrier last year with fresh capital investments.

Overall, the conglomerate said its businesses saw sales growth of 17 percent last year, while Valores' net assets shrank by 29 percent to 991 billion pesos ($335 million). Colombia's peso currency lost 25 percent of its value against the U.S. dollar last year.

Valores' other business partners include France's Carrefour and Spain's Prisa .

($1 = 2,956 pesos) (Additional reporting by Javier Mozzo)