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Austrian steelmaker’s profits melt down

Profits at Austrian steelmaker Voestalpine, which has been focusing on the high-end market to escape sector weakness, tanked as an energy sector downturn took its toll, the group said Tuesday.

Austrian steelmaker's profits melt down
Creative Commons/JWPhotowerks

Net profit fell 63.5 percent in the three months to June, Voestalpine's financial year, to  €105.8 million, while Ebit, a measure of operating profit, dropped 7.6 percent to €2.77 billion.

Steelmakers across the world have seen their profits and market capitalisations slump on weak steel demand and oversupply, often blamed on alleged steel dumping by Chinese producers. 

Voestalpine's response has been to focus on the market segment demanding the greatest degree of steel quality, such as railways, the car industry, high tech and tools.

This high-end strategy was paying off, Voestalpine said, protecting income from the global slump. But the company also supplies steel products to the oil and energy industry, where capital investment has been plunging because of low oil prices, ripping holes into Voestalpine's earnings.

“Although the global economic conditions became more challenging in the first quarter of the current business year and, as previously often forecast, left their mark on our earnings figures, those market segments that are most important for us – with the exception of the energy sector – remain at a stable and solid level,” chief executive Wolfgang Eder said in a statement.

Voestalpine said the earnings downturn had been expected, especially since the year-earlier bottom line had been boosted by one-off gains.

Stripping out non-recurring items, the net profit drop was 28.3 percent. Looking ahead, Voestalpine said that the higher prices it now commands in the steel contract business would feed into profits in the current financial year, and it also expected the oil and gas sector to start investing again.

This trend should lead to stable profits in the current year compared to the previous 12 months, Eder said.

But investors were disappointed in the earnings report and Voestalpine shares fell 2.2 percent to €31.36 on the Vienna stock exchange in early business Tuesday.

 

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BUSINESS

Germany’s BMW to put €1 billion into electric vehicles in Austria

German auto manufacturer BMW said on Monday it would invest "around one billion euros" in the production of electric vehicles at a plant in Austria from 2025.

Germany's BMW to put €1 billion into electric vehicles in Austria

Altogether, 600,000 units a year should roll off the line at the factory in Steyr under the investment plan, set to run until 2030, BMW said in a statement.

From 2025, BMW will “develop and produce the next generation of e-drives” at the Austrian site, BMW’s production chief Milan Nedeljkovic said.

The refurbishment of the plant will see two new production lines added and the location expanded by 60,000 square metres.

The new facilities would require €710 million in investment, while €230 million would be dedicated to boosting vehicle development at Steyr.

“Around half” the 4,400 employees at the site would be working on “e-mobility” by 2030, plant boss Alexander Susanek said.

The Bavarian manufacturer said it aimed to have two million electric vehicles on the road by 2025, promising 13 new electric models and a revamp of its Mini brand.

BMW has already said it will spend €400 million to upgrade its home factory in Munich to produce electric vehicles.

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