Voestalpine posted red in the 2019/20 financial year for the first time since going public. The bottom line is that the company lacks 220 million euros. Now there are 2,000 more jobs at stake.
The steel and technology group voestalpine (AT0000937503) posted deep red numbers in the 2019/20 financial year for the first time since the IPO in 1995. The bottom line is that the company lacks almost 220 million euros. Over 2,000 jobs have already been cut – around half of them in Austria. Now there is a risk of further job cuts. “In a phase like this, you cannot rule out the possibility of layoffs,” said CEO Herbert Eibensteiner.
Around 15,400 of the Group’s employees worldwide are currently in short-time working models – 10,000 of them in Austria, 3,000 in Germany. “That is a little less than half of the employees in these countries,” said the CEO at the video balance press conference on Wednesday. In addition, there are around 2,400 employees in short-time work-like models elsewhere. In this country, voestalpine employs around 22,000 people. Worldwide, the workforce was reduced by more than four percent from just under 52,000 to 49,700 in the past year. “In Austria, we mainly cut leasing staff,” reported Eibensteiner.
Short-time work is extended
In addition to short-time work to ensure the Group’s liquidity, voestalpine in Austria also made use of the possibility of social security and tax deferrals. “That amounts to about 50 million euros per month, which will then be due in total at the end of the calendar year,” said CFO Robert Ottel. “Otherwise we have not used any instruments – from today’s perspective, we do not intend to use COFAG financing (from the Corona financing agency, note) with the liquidity we have.”
With short-time work, however, Voest wants to go into extension. “We assume that we will also need the second short-time working round in other areas,” Eibensteiner expects. This does not apply to the areas of rail infrastructure, heavy plates and foundries. Short-time work has been possible since March – the first three-month period was extended by a further three months. The government had already announced that it would consider a model after September. “I assume that in some areas it will be necessary to use a modified model,” said the CEO.
Crisis fields in aeronautics and oil / gas
“There will be areas where we expect difficulties for longer – there we will have to make further ‘capacity reductions’ after the summer,” announced the CEO. “We have two areas that are in a very difficult environment – the aircraft industry and the oil and gas sector.” Further adjustments could also be necessary “in the automotive sector” and at Buderus Edelstahl (in Wetzlar, Germany). That depends on the economic trend, which from today’s perspective is not yet foreseeable. “It is now important for us to do crisis management.” The costs will be reduced further and so will the investments.
The small blast furnace in Linz was shut down in the second half of March until further notice; the two large ones continue to run. In April, however, Voest only operated with a capacity of just over 50 percent. The group operates two further blast furnaces in Donawitz – one of which is provisionally at least until autumn. The routine due replacement of wearing parts has been brought forward by two and a half weeks. It is currently not known when the blast furnaces that are currently shut down will go back into operation.
COVID-19 as a low blow
The first signs of an economic recovery were only given at the beginning of the year. “All of this was abruptly ended by the Covid-19 pandemic,” said the voestalpine boss, referring to the “worldwide significant recession”. The automotive industry with a very important global supply chain has declined significantly again. “In the core market of Germany, automobile production has declined by 9 percent for the second year in a row,” said the executive board of the Metal Forming Division, Peter Schwab, explaining the poor market situation.
Voest’s operating profit (EBIT) in 2019/20 was “negative for the first time in decades”. According to Ottel’s CFO, the shortfall before taxes and interest of just under EUR 90 million is mainly due to unscheduled depreciation, mainly on assets, but also goodwill – in total, EBIT was burdened by EUR 480 million in the entire fiscal year. The first major installment (€ 360 million) was due shortly before Christmas, the rest in the face of Corona.
Investments are postponed
In response to the crisis, the group, which had to issue a number of profit warnings even without Corona in the past financial year, has tightened its austerity measures once again. “We decided relatively quickly to react to this environment and have put the brakes on investment,” reported Eibensteiner. In 2019/20, 100 million euros had already been saved. “We have decided to further reduce investments to around EUR 600 million,” said the CEO. In previous years, the amount was twice as high at 1.2 billion euros.
“Small, short-term investments continue, long-term not – with the exception of Kapfenberg,” summarized the CFO. The fully automated stainless steel plant in Styrian Muerz Valley is already under construction. From today’s perspective, completion will be postponed by three to six months to the end of 2021. In total, investments totaling 500 million euros are estimated there over a period of five years.
“The most important thing is that the focus over the coming months is on coping with the crisis,” emphasized CEO Eibensteiner. “This week is the first week when all of our factories are back in operation – we are now starting up together with our customers.” In China, the occupancy rate has almost reached 100 percent again – this is a sector that generates sales of around EUR 600 million. In 2019/20 as a whole, Group sales fell by EUR 900 million due to the economic situation, from EUR 13.6 billion to EUR 12.7 billion.
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