By Anil Mathews
June 02, 2017 09:50:49 AM
FT- Voestalpine has reported surging demand for its high-specification steel products, despite political turmoil in Europe and the US, after reporting higher than expected operating profits for the financial year to the end of March.
Demand in many customer segments was “much more positive” than a year ago, the Austrian steel company said on Thursday, while revenues and earnings would be “strong, significantly higher” in the first six months of the 2017-18 financial year than a year earlier.
The first half would be “good, possibly very good”, said Wolfgang Eder, chief executive, although he remained cautious on the longer term outlook.
Voestalpine warned the global political environment was still challenging — it has significant production capacity in the US. But the Linz-based company reckoned “the impact of any US trade barriers and the pressure of steel imported into Europe at dumping prices should have a limited overall effect on Voestalpine products”.
Economic growth in Europe, where it generates 70 per cent of revenues, had been “surprisingly stable” over the past year, Mr Eder said, although the US had lost momentum.
Despite being headquartered in high-cost Austria, Voestalpine fared better than European rivals by focusing on supplying higher-margin premium metal parts to technology-intensive companies, especially in the car and aviation sectors.
The company recently opened a $740m plant at the port of Corpus Christi in Texas — one of the largest investments in the US steel industry in recent years. The plant makes hot briquetted iron, an intermediate material used for making high-quality steel.
Operating profits increased by 6.6 per cent to €1.54bn in the year to March 31, excluding one-off effects. Revenues rose from €11.1bn to €11.3bn. The final three months had seen the best quarterly performance “by far” during the financial year — and it had been Voestalpine’s most profitable quarter since 2012, the company said.
The upbeat tone contrasted with the mood less than two years ago when Voestalpine warned of the effects of sharp price falls and overcapacity in the sector, and scaled back expansion plans.
Voestalpine has helped drive a powerful rally in Austrian stocks this year — which has outpaced increases in German and French stock markets. The group’s shares initially rose more than 2 per cent in European trading on Thursday, before giving up their gains. At €39.81 they were 35 per cent higher than a year ago, however.