Austrian steelmaker Voestalpine Group expects a seasonally weak demand in Q2 amid end-user shutdowns. The group maintains its initial forecast of €600mn to €1bn EBITDA for FY2020-21, according to the earnings statement.
Outlook
Steel demand has recovered incremental from Q1 depending on regions and markets with the end of the COVID-19-related lockdowns. Voestalpine has shied away from assessing the economic recovery and expects clarity by the end of Q2. The group will maintain its focus on reducing costs, stabilizing earnings and efficient management of working capital.
Production
In Q1 FY2020-21 (April to June), Voestalpine’s crude steel production dropped by 22pc to 1.48mn mt amid a slump in steel demand. The Covid-19 pandemic impacted demand in most countries and sectors, especially the automotive industry. A general weakness in European industries, which drives two-thirds of Voestalpine’s revenues, severely impacted sales.
The slump in demand pressured steel prices, but the strength of China’s steel industry supported iron ore prices, creating anomaly that drove down the Voestalpine’s earnings. The company’s units in China have returned to pre-pandemic capacity utilization levels in Q1, while plants in Russia and South America continued to remain under utilized in the quarter.
| Voestalpine’s steel production in Q1 | |||
|---|---|---|---|
| (Unit: mt) | Q1 2020-21 | Q1 2019-20 | Change YoY |
| Steel division (flat) | 1,027,468 | 1,342,184 | -23% |
| Metal engineering (long) | 305,463 | 3,94,333 | -23% |
| High performance metals (Specialty) | 151,714 | 174,519 | -13% |
| Total group | 1,484,645 | 1,911,036 | -22% |
Shipments
Voestalpine’s Steel division shipment volumes dropped by 33pc to 814,412mt in Q1 from the prior year quarter. The division produces flat products including heavy plates, HRC, CRC, coated. Sales volumes of Metal Engineering division, which produces long products including billets, blooms, ails, wire rod, seamless tubes, dropped by 28pc to 276,494mt. In the division, rails shipment grew 9pc from Q1 2019-20 driven by online bookings. The company’s shipments to aerospace, oil and gas industries were severely impacted by the pandemic.
| Voestalpine’s steel shipment in Q1 | |||
| Long steel – (Metal Engineering division) | |||
| (Unit: mt) | Q1 2020-21 | Q1 2019-20 | Change YoY |
| Rails | 148,713 | 136,139 | 9% |
| Wire Rod | 58,687 | 131,693 | -55% |
| Seamless Tubes | 54,164 | 90,055 | -40% |
| Billets & Blooms | 14,930 | 27,019 | -45% |
| Total | 276,494 | 384,906 | -28% |
| Flat steel (Steel division) | |||
| Heavy plates | 74,239 | 1,16,770 | -36% |
| HRC | 1,82,584 | 2,67,560 | -32% |
| CRC | 1,82,738 | 2,41,770 | -24% |
| Treated | 3,71,868 | 5,89,130 | -37% |
| Misc. | 2,983 | 2,740 | 9% |
| Total | 814,412 | 1,217,970 | -33% |
Financials
Voestalpine group’s revenues declined by 28.1pc in Q1 from the prior year quarter to €2.4bn. The group’s profit after tax was €70mn down from €90mn in Q1 2019-20.
In FY2019-2020, Voestalpine group produced 7.17mn mt crude steel and posted revenues of €12.7bn and EBITDA of €1.2bn.
($1= €0.84)