Steel maker warns it cannot repeat profit surge

Austrian steel maker Voestalpine expects profits to stay flat in the business year 2018-19 after the previous year’s surge, impeded by a US shift towards protectionist trade policies and signs of a slowing economy in Europe.

Strong demand from the motor industry helped the group increase 2017-18 operating profit by 43%.

Voestalpine has specialised in finished parts for the automotive, aerospace and rail industries in recent years to deal with strong competition and overcapacity in the sector.

The group, which opened a $1bn plant in Texas in the US in 2016 as part of its strategy to grow abroad, plans to increase its payout to shareholders by 27% to €1.40 per share.

CEO Wolfgang Eder told a news conference it was too early to talk about next year’s dividend but suggested that an upper limit for the dividend had been reached.

Helped by continued strong demand in Europe and China, Eder said he hoped for stable earnings in the 2018-19 business year that ends in March.

“Europe was characterised by a broad economic upswing last year, and basically this has not changed even if some indicators point to a slowdown,” Eder said.

The CEO added that political developments in Italy and Spain could also cloud prospects.

He said protectionist measures in the US could affect Voestalpine’s business directly and indirectly. “The impact and the collateral damage of the American protectionist policy, that’s the big question mark.”

Voestalpine generates twothirds of its revenue in the EU, about 10% in the US and 8% in Asia. In addition to continuing strong demand from the motor industry, Voestalpine expects growing demand from the oil and gas sector and the construction sector.

Most of its 47 US sites work with domestic raw material. But around one-third of the revenue derives from steel imports, as Voestalpine needs certain flat steels for car components, tool steels and special alloys for aviation customers and ultra-thin strip steels for scalpels.

Eder said the group plans to invest about €900m this business year.