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Linz’s steel group Voestalpine also did not break out of the red in the second quarter of 2020/21.
Upper Austrian steel group voestalpine had to deal with losses even before the crown crisis. The pandemic put an additional brake on it. The bottom line is a net loss of 276 million euros in the first half of fiscal 2020/21, as the company announced on Tuesday. In the same period of the previous year, a profit of 115 million euros had been obtained.
Even before the Covid 19 pandemic, the company was hit by the slowdown in the economy, punitive U.S. tariffs on steel products, a cost explosion at pig iron plants in Texas, and excessive start-up costs in the American auto plant in Cartersville (Georgia).
Then there was Corona. This year, sales fell 21.9 percent to 5.1 billion euros between April and September. According to the information, this was due to lower delivery volumes and lower prices. The workforce was notably reduced by 6.5 percent to 47,917 employees worldwide. In October, around 2,500 Group employees in Austria and around 1,200 in Germany worked part-time and another 1,800 internationally on similar part-time models, especially in Brazil, Sweden, South Africa, France and Great Britain.
Earnings before interest, taxes, depreciation and amortization (EBITDA) deteriorated significantly from 666 million euros to 395 million euros in the same period of the previous year. The EBITDA margin fell accordingly from 10.2 percent in the prior year to 7.7 percent today. The operating result (EBIT) went negative from more than 230 million euros to less than 215 million euros. In addition to purely operational development, the main reason for this is the special depreciation in voestalpine Texas and voestalpine Tubulars (around 200 million euros) as a result of global market changes, exacerbated by the Covid-19 pandemic.
According to the information, the first signs of relaxation appear. The first quarter of 2020/21 was still characterized by a massive drop in demand in almost all customer segments and regions, but there was a notable recovery in key industries in the second quarter.
The European and American auto industries in particular, but also the consumer goods and construction industries, quickly regained momentum after lockdown measures in the spring. In September, in view of the increasing demand for high-quality steel products, Voest restarted the small temporarily closed blast furnace in Linz. Plants in China had already reached pre-crisis production capacity utilization in the first quarter of the current financial year (end of March 2021). However, the situation in the aviation and oil and gas segments, which are particularly affected by the consequences of the pandemic, remains difficult. The sub-areas of railway infrastructure and storage systems remain stable.
Based on intensive cost and benefit optimization measures, as well as a lower investment of € 245 million, voestalpine achieved significantly higher operating cash flow of € 563 million and a free cash flow of € 281 million in the first half of the year, the group also announced.
The leverage ratio (net financial debt relative to equity) improved year-on-year from 75.1 percent to 66.2 percent at the end of September. Equity, which was weighed down not only by operational development but also by special depreciation, went from 6 to 5,300 million euros. At the same time, thanks to the good evolution of cash flow, net financial debt fell from 4.5 to 3.5 billion euros.
“The clearly positive EBITDA operating result and the increase in cash flow show that our consistent cost reduction and efficiency improvement programs have come into effect,” said CEO Herbert Eibensteiner. At the same time, this result reflects “the recovery in demand in key customer segments throughout the second quarter.” “Despite the positive signals from the market, it remains to be seen how the new lockdown measures in Europe will affect the economy.”
With the exception of the oil and gas sector and the aviation industry, the positive trend in demand for voestalpine Group products in all major market segments should continue in the second half of 2020/21, according to management. “Therefore, assuming there are no further significant economic constraints due to the Covid-19 pandemic, such as the officially prescribed measures in this context, the Board of Directors currently expects EBITDA in the range of EUR 800 million to one billion for all the 2020/21 financial year, “said the CEO.
The forecast rose slightly to this range towards the end of October. The Board of Directors cited “improvements in the general economic environment” as the reason. In the last presentation of the balance sheet in June, the group had assumed a lower limit of 600 million euros.
(WHAT)
