Gruppo Riva Fire SpA

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Gruppo Riva Fire SpA

Viale Certosa 249
Milan, I-20151
Italy
Telephone: (39 02) 307001
Fax: (39 02) 38003077
Web site: http://www.rivagroup.com

Nonquoted Public Company
Incorporated: 1954 as Riva & C. S.A.S.
Employees: 25,530
Sales: EUR 8.53 billion ($11.21 billion) (2005)
NAIC: 423510 Metals Service Centers and Other Metal Merchant Wholesalers

Gruppo Riva Fire SpA is the largest steel producer in Italy, the fourth largest in Europe and the number ten–ranked steel group worldwide. The highly private, sometimes described as secretive, company is also one of the few remaining family-owned steel giants, entirely controlled by the founding Riva family. Created as a processor of scrap metals following World War II, Riva has built a largely European-based network of steel companies through a long policy of acquisitions. As such the company has expanded beyond its original works, Riva Acciaio, built in 1957, to include 20 production facilities in Italy. Riva’s operations include the Ilva steel group, formerly owned by the Italian government.

The company’s international operations include 18 steelworks in Belgium, France, Germany, Greece, and Spain, as well as in Tunisia and in Montreal, Canada. Riva’s raw steel output reached 17.5 million metric tons (tonnes) at the beginning of 2007, placing the company ahead of ThyssenKrupp and just behind the United States’ Nucor Corporation. The company also manufactures a range of finished steel products, including black coil, wire rod, reinforcing steel for the construction industry, rolled bars and billets, welded pipes, and hollow steel sections. These products raise the company’s total production capacity to 23.8 million tonnes. Founder Emilio Riva remains chairman of the company while all major administrative and executive positions are held by members of the Riva family, including Riva’s sons Nicola, Fabio, Daniele, and Claudio, and nephews Cesare and Angelo. The company reported sales of EUR 8.53 billion ($11.2 billion) in 2005.

SCRAP METAL PROCESSOR AFTER WORLD WAR II

Few of the world’s steel magnates could boast such humble origins as Emilio Riva. Together with brother Adriano, Riva started out in the steel business by collecting scrap left behind in the aftermath of World War II. For this, Riva purchased an old Dodge truck, and, joined by brother Adriano, began making the rounds of the Milan area. By the early 1950s, the Riva brothers had built something of a scrap metal empire. In the meantime, the reconstruction of postwar Italy, and the growing economic boom, produced a new demand for steel and iron products. In response, the Rivas decided to enter the steel industry proper, establishing Riva & C. S.A.S. in 1954.

Construction of the group’s first steelworks, in the Caronna industrial area outside of Milan, began in 1955 and was completed in 1957. The new works, known as Acciaierie e Ferriere Riva (Riva Steel and Iron), was built along the minimill model, based on the use of an electric furnace. This provided the company with a greater degree of flexibility than steel producers focused on traditional foundries, allowing the company to adapt to cycles in the market.

Riva’s first production centered around steel ingots. By the early 1960s, Riva had begun to expand its interest into the wider flat steel category. The company continued to invest in its production capacity, and especially in its production technology. An important investment for the company came at the beginning of the 1960s when it developed its own continuous casting system. Designed in partnership with Italian industrial designers Enzo Colombo and Luigi Danieli, the new continuous casting facility at the Caronna site went active in 1964. The timing proved fortunate, as a recession had placed the Italian steel industry under severe pressure. Yet the lower production costs of Riva’s continuous casting works enabled the company to flourish during this period.

The new works also allowed Riva to expand its range of products, including flat rolled steel products through the 1960s. By the end of the decade, the company’s total output had already topped 300,000 tons, making it one of the largest of Italy’s minimill operations. Part of this growth came from another important strategic move made by the company at the end of the 1950s and into the 1960s. While much of the Italian steel industry had focused on the Italian construction market, Riva had turned its attention to developing its exports. Ethiopia, which was undergoing a construction boom under Emperor Haile Selassie, provided the company’s with its first international market. The move beyond Italy’s markets further helped buffer Riva against the dip in the Italian economy during that decade, and especially into the 1970s.

ACQUIRING INTERNATIONAL SCALE IN THE SEVENTIES

While Riva had flourished in the 1960s, many of its rivals had not, and by the 1970s, an increasing number of steelworks had been forced to shut down, or barely clung to survival. Riva seized the moment, adopting a new strategy that became a company hallmark over the next decades. Instead of building new steelworks, the company targeted the takeover of struggling steelworks, which the company then restructured and, ultimately, revitalized. The first of Riva’s acquisitions came in 1970, when the company acquired the Tanaro iron and steel works in Lesgno, and the SEII works, in Malegno. These purchases not only represented a major boost in the company’s total output, they also provided the company with an extension into the market for long rolled steel products.

Riva’s background in scrap processing provided its next international expansion opportunity. In 1971 the company took over the management of, as well as a minority stake in, Siderurgica Sevillana S.A. That company had been created in 1965 by a consortium of Spanish, Italian, and German investors in order to convert scrap metal into long rolled steel, especially steel bars for use in reinforced concrete. Construction of the Spanish company’s minimill began that year, with production launched in 1968. Yet a series of setback led investors to bring in Riva to steer its operations. Under Riva’s management, Siderurgica Sevillana targeted the export market. The company also expanded production, following its diversification into angle, flat, and square merchant bars starting in 1975. Over time, Riva continued to increase its stake in the Spanish company, finally claiming full control in 1988.

COMPANY PERSPECTIVES

Riva Group consists of several companies operating in the iron and steel production industry and related activities. It is the outright leader of the sector in Italy, the 4th in Europe, and 10th in the world. This position was attained over half a century, as the result of an expansion policy which included the acquisition, restructuring and revitalization of several companies.

By then Riva had begun developing its presence in another important European market. In 1977, the company acquired majority control of France’s Iton Seine. That company had been formed only at the beginning of the decade, when a group of French steel producers, including Compagnie Françaises de Ferrailles (CFF), sought to adapt Italian minimill technology for the production of reinforced concrete bars. Iton Seine’s production was intended for use by for Usines Métallurgiques de Saint-Eloi (UMSE), a company founded in 1918 in order to laminate rails for the French railroad system. In the 1950s, UMSE had developed a system for converting declassified rails into a new type of steel reinforcing bar, marketed under the Creloi brand. The creation of Iton Seine was meant to ensure UMSE steel supply, as the number of declassified rails dwindled strongly in the 1960s. Production at Iton Seine was launched in 1973 in time to face the full brunt of a new economic recession. By the middle of the decade, Iton Seine bordered on bankruptcy. As a result, Riva was able to acquire an 80 percent stake, with CFF maintaining 20 percent.

Riva once again put into practice its strategy of restructuring its acquisitions. The company invested in renewing Iton Seine’s production line, introducing a higher degree of automation, while also boosting production. By 1978 the French plant’s production had been raised from its original capacity of 70,000 tons to more than 100,000 tons. Over the next three decades, the Iton Seine facility would continue to expand its production, as well as its product line, more than tripling its output. The French company also provided the spearhead for Riva’s entry into the Chinese market, which had until then been dominated by the Japanese steelmakers. Riva celebrated its success by acquiring the remaining 20 percent in its French subsidiary from CFF in 1997.

ADDING GROWTH IN THE EIGHTIES

The Riva family themselves remained highly secretive, refusing to give interviews and generally avoiding the spotlight as they built their company into one of Italy’s steel powerhouses. One example of the company’s preference for discretion was that for many years calls to the company’s headquarters were answered not with the company’s name, but only its telephone number. The company steadfastly resisted any temptation to go public.

In the meantime, Riva’s growth and acquisition strategy continued to bring strong results. The booming construction market of the 1980s enabled Riva to make dramatic advances in its production capacity. By the end of the decade, the company’s total capacity had topped 3.2 million tons, nearly one-third of which was outside of Italy. The company had succeeded in establishing itself as a major rolled steel products producer in the European market, and especially in the market for steel reinforcing bars. By 1989 Riva claimed a 10 percent share of that market in the Europe Common Market countries.

At the same time, Riva had entered the market for wire rod, through its purchase of another struggling Italian group, Verona-based Officine e Fonderie Galtarossa. Riva applied its successful revitalization strategy to the Galtarossa works, at the same time investing in extending its range to include higher-value-added products, such as wire mesh. In this way, Riva succeeded in boosting Galtarossa’s output more than 500 percent by the middle of the 1980s.

The promise of the privatization of Italy’s steel sector—most of which remained under government control—brought new opportunities for Riva at the end of the 1980s. In 1988 Riva became the first to acquire a privatized steel firm, when it purchased Acciaierie di Cornigliano from the government-controlled Cogea Consortium. That acquisition allowed Riva to double its total steel output in Italy to more than 4 million tons.

Soon after the Cornigliano purchase, Riva returned to France, where it acquired a majority stake in the Gargenville steelworks of Aciéries et Laminoirs de Paris. The company then traveled farther north, buying a rolling mill in Charleroi-Marcinelle, Belgium, from the Cockerille-Sambre group. The latter purchase added 750,000 tons per year of wire rod capacity. Riva’s investment at the plant, especially the incorporation of an electric minimill, provided for a new increase in production at that subsidiary, renamed THY Marcinelle.

KEY DATES

1945:: Brothers Emilio and Adriano Riva begin scrap metal collection business in Milan, Italy.
1954:: Creation of Riva & C. S.A.S. and construction of company’s first steel mill.
1961:: Launch of imports to Ethiopia and investment in continuous rolling machinery ensure company’s survival during Italian recession.
1970:: Company’s first acquisitions in Italy, in Lesegno and Malegno, followed by acquisitions in Spain and France.
1988:: Company doubles in size after acquisition of Acciaierie di Cornigliano as part of Italian steel industry privatization.
1995:: The acquisition of ILVA makes Riva the leading Italian steel producer.
2005:: Riva enters North American market with establishment of scrap iron recovery and recycling plant in Montreal.

The reunification of Germany at the end of the 1980s provided a new expansion opportunity. In 1991, the company joined in the privatization of the former East German steel industry by acquiring two steelworks based in the Berlin area, Brandenburger Elektrostahlwerke and Hennigsdorfer Elektrostahlwerke. Once again, Riva invested heavily in revitalizing both steel works. By the beginning of the next century, Riva’s German operations’ combined output neared 2.3 million tons—more than 16 percent of the company’s total production.

CRACKING THE GLOBAL TOP TEN IN THE NEW CENTURY

By 1994 Riva had boosted its total production to 5.8 million tons, ensuring it a prominent position among the European steel industry. Yet the company was about to make a new acquisition that would catapult it into the global big leagues.

In 1995 the Italian government announced its intention to continue the privatization of its steel interests with the sale of the massive Ilva Laminati Piani complex, the largest of the state-owned steel operations. The acceptance of Riva’s bid was viewed as a crowning achievement for the 40-year-old company, which had grown from nothing to take its place as Italy’s largest steel company. The addition of the Ilva works not only doubled the group’s total output—establishing Riva as the number four steel producer in Europe and the eleventh largest in the world—it also allowed the company to complete its range of general and specialty steel products, in both flat and long rolled categories.

Amid the ongoing consolidation of the international steel market, which saw the emergence into the middle of the first decade of the 2000s of such behemoths as Mittal/Arcelor, Nippon Steel, JFE Holdings, among others, family-owned Riva set its sights on claiming a spot among the top ten. The company next turned to Greece, where it bought control of Salonicabased, flat cold-rolled steel producer Hellenic Steel. In 2000, Riva returned to France, buying the Usinor’s “SAM” group of four electric minimills that specialized in the production of wire rod. The company then expanded its German presence, buying a wire rod producer in Lampertheim in 2001.

By 2007 Riva had succeed in joining the top 10 steelmakers, with a total raw steel output of 17.5 million metric tons, and total production capacity of nearly 24 million metric tons. The company, which had long focused its expansion on the European market, had also begun to extend its network into new markets, including the purchase of a steelworks in Tunisia. In 2005 the company made its first entry into Canada as well, setting up a scrap recovery and recycling plant in Montreal. With sales of more than EUR 8.5 billion ($11 billion), Riva had not only become Italy’s leading steel producer, it had also become one of its largest corporations. Yet the company remained firmly under the Riva family’s control. All of the company’s major executive and administrative positions were filled by members of the Riva family—including Emilio Riva’s four sons and two nephews.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

Hellenic Steel (Greece); ILVA; Ilva America (Canada); Ilva Servizi Marittimi; Ilva UK; Immobiliare Siderurgica; Innee Cilindri; Riva Acciaio SpA; Riva Stahl (Germany); Siderurgica Sevillana S.A. (Spain); Socova; Tillet; Tunisacier (Tunisia).

PRINCIPAL COMPETITORS

Mittal/Arcelor; Nippon Steel Corporation; POSCO; JFE Holdings Inc.; Corus Nederland B.V.; Shanghai Baosteel Group Corporation; Tata Sons Ltd.; United States Steel Corporation; Nucor Corporation; Thyssen-Krupp AG.