Picture: AFP
Picture: AFP

Vienna — Specialty steelmaker Voestalpine expects further downward pressure on earnings from a slowing European economy, it says after a swing to a quarterly loss knocked 5% off its share price.

The European steel sector is navigating choppy waters as the car industry, one of its main customers, is slowing and pressure on oil prices has dampened demand from the oil equipment industry.

Voestalpine issued its second profit warning in four months in January and its statement on Thursday sent its shares down as much as 5.6%.

Finnish stainless steel maker Outokumpu and German steelmaker Salzgitter also warned of weaker profits.

Voestalpine, whose share price fell by nearly half last year, reported a net loss of €40.5m for the October-December quarter. That compared to a net profit of €167m in the same period a year earlier.

Besides overall weak sentiment, slower demand from the automotive industry, stand-stills at its plant in Texas, operating problems in another US plant and provisions for a German cartel investigation added to its problems, the Austrian group said.

CEO Wolfgang Eder, who bows out in July after 15 years in charge, sees Britain’s still unclear divorce procedure from the EU and the trade dispute between the US and China holding back growth. He said he does not expect a major downturn in the steel sector but more pressure on prices, largely due to weakening demand in China.

“We will see more pressure again from imports ... from other countries into Europe,” he said on a media call, urging politicians not to intensify protectionist measures as this would worsen the situation.

The US imposed tariffs of 25% on steel imports from the EU, Canada and Mexico in June. In response, the EU decided to impose limits on steel coming into the bloc.

However, Eder said Voestalpine’s dividend for the current business year will not fall significantly from last year’s €1.40 per share. 

He said he expects the German cartel office to take its next steps regarding a 2017 probe into alleged agreements relating to heavy plate in the first half 2019. Eder declined to say what Voestalpine’s provision for this was.

Difficulties with a new assembly line for automotive components at a plant in Cartersville, in the US state of Georgia, have been brought under control and all negative effects for the financial year have been booked, Eder said. Production at the group’s Texas plant had been stabilised.

Voestalpine’s shares were down 5.5% at €25.73 in morning trade.
Reuters