Austria-based voestalpine announced it is undertaking non-recurring writeoffs totaling €280mn (US$ 312mn) amid global economic headwinds.
Several of the company’s key business segments—including Giesserei Traisen GmbH, voestalpine Tubulars GmbH & Co KG, Buderus Edelstahl GmbH, Automotive Components Cartersville Inc., and voestalpine Texas LLC—will have what the company called lower expectations.
The Steel Division of the voestalpine Group is writing off €200mn, 71pc of the total writeoff amount, with €175mn at the HBI [high-quality sponge iron] plant and €20-25mn at the Cartersville site. The company stated the HBI plant has been severely impacted by both high iron ore and low scrap prices, which it believes will continue. voestalpine further noted the decoupling of prices between iron ore and local scrap prices has affected its HBI prices and production.
voestalpine Texas LLC, valued at €550mn when it opened in Oct. 2016, has a capacity of 2mn mt, with 800,00mt allocated for internal use at voestalpine’s two Austrian sites. The remaining 60pc is sold to customers like Big River Steel LLC in Arkansas and some Mexican mills, including Altos Hornos de Mexico and Talleres Y Aceros. Contracts carry four-year terms and are up for renewal in 2020. Capacity reduction at the company’s HBI plant has not yet been announced.
HBI competes with scrap as a raw material used in steel production along with pig iron, and it’s known for its purity, absence of nickel and zinc, as well as environmental advantages. Texas was selected for the site because of its cost-efficient energy supply and the site’s deep-sea port in the Gulf of Mexico.
The Cartersville site opened in 2014 and a year later to specialize in train rails and automotive products. The company concluded the productivity level initially conceived for the plant cannot be achieved because of headwinds in the automotive sector.
About two-thirds of voestalpine’s global annual revenue of €13.6bn comes from contracts in the automotive and aerospace industries. voestalpine expects an adjusted operating EBITDA of around €1.2bn.
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