Voestalpine, a diesel crisis

Voestalpine, a diesel crisis

LINZ / VIENNA. The operating result fell by nearly a fifth in the first half of the year – automakers are slowing new car production.

Just two weeks ago, voestalpine CEO Wolfgang Eder had to announce a profit warning. The annual result will not be completed, but less than one billion euros. He confirmed it at the biannual press conference held yesterday in Vienna.

In addition to the costs badociated with the rehabilitation of blast furnaces and international commercial disputes (see article opposite), the Group also suffers from the deterioration of the automotive market. The letter to shareholders mentions "short-term and sometimes significant reductions" in orders. This has cost a lot of results to the two divisions that supply the automotive sector.

Eder said the drop in orders had reduced the use of capacity to a normal level. Before that, production was reaching its limits. He badumes that European automakers will use the end of year time as a valve to further reduce their capacity. "It's going to be exciting," said Eder. He expects that the holidays in the factories tend to be longer.

Uncertain prospects have also been tackled by carmakers from Upper Austria at the sectoral meeting of yesterday. The automotive sector 2018 of the automotive sector was held in the Voestalpine Stahlwelt. The backwater that Volkswagen causes with the exhaust emissions test (WLTP) of many diesel models "directly influences our suppliers", confirms the head of the cluster, Wolfgang Komatz. 90% of the production of auto parts is exported, of which 60% in the German market. But: "It's a shot, not a burglary," recognizes the industry.

In addition, yesterday's event shattered the message that the premium BMW carmaker – represented very visibly in Upper Austria with the group's largest engine plant – has fallen sharply of his profits. In the Automotive segment, earnings before interest and taxes (EBIT) for the third quarter decreased by 47% to 930 million euros.

Suppliers are barely able to plan. For example, a contractor from Upper Austria said that during the first quarter of 2019, he should adjust to deliveries of between 6,000 and 300,000 units for a specific action. This is unusual even for short-term car manufacturers – who do not always treat their suppliers well. "We are facing unpredictable model changes and we are getting reliable statements from all manufacturers," said Hörschinger's publicly traded automotive supplier Polytec, Markus Huemer.

Polytec profit minus 28 percent

Around a quarter of Polytec's auto parts production is handled by VW. But: "This is not a general economic problem, but it is the diesel dislocations." The diesel crisis is already evident in the figures of the first nine months: the profit after tax of the group has decreased by 28.4% to 22.2 million euros during the first three quarters.

Wolfgang Rathner, managing director of Autozulieferer Fill in Gurten, does not feel the diesel crisis: the toolmaker has long since expanded from conventional powertrain supplier to light construction and electric vehicles .

Linz head of car, Heinz Hollerweger (Seat), speaks of a serious anomaly in the car industry. "It's painful, but it may be a cure, and car makers are still making a lot of money."

A fire and expensive renovation

The first half of voestalpine went well, but not as well as expected. Despite record sales of 6.7 billion euros (plus 6%), operating profit (EBIT) fell by 18%. The voestalpine action was again one of the losers of the Vienna Stock Exchange.

At the semiannual press conference, CEO Wolfgang Eder listed the reasons: Blast furnace repair cost 150 million euros. Contrary to what was originally planned, this could only be offset by a third party.

For the first time, global trade disputes with the United States have had notable effects, for example, because less stainless steel from Sweden 's Uddeholm plant is processed in China. In total, these effects cost between 30 and 40 million euros of result.

The sponge plant in Texas is expected to generate between 2.5 and 4 million euros in operating profit (EBIT) per year. It is now missing four weeks of production due to floods and a gas explosion. Detail on the edge: only one crane had to wait six days. "In Linz it would have been a lot quicker to fix," says Eder.

The commissioning of new automotive plants in the United States also cost more than expected. Add to that the turbulence of the European car industry

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