Voestalpine was hit hard by the economic effects of the corona pandemic in the first quarter of its 2020/21 financial year. Now employees in Austria must be fired too.
Lockdown, mask requirement, constant hand washing, disinfection, keeping a distance, exit restrictions – in spring 2020 the Corona pandemic had a firm grip on all of Europe.
The massive effects on the economy are still visible everywhere and can be seen in the bare figures and statistics. The labor market statistics as well as the results of the companies, which are now gradually presenting balance sheets for the time of the shutdown.
The quarterly balance sheet of the steel and technology group voestalpine (AT0000937503) for the first quarter of fiscal year 2020/21 – the period April to June 2020 – is no exception. The measures taken worldwide to combat the virus during this period and the associated production downtimes have led to a massive drop in demand in almost all markets and thus to a dramatic drop in sales and earnings. Sales were 28 percent lower than in the previous year, earnings after taxes slipped from a profit of EUR 90 million in the same quarter of the previous year to a loss of EUR 70 million.
As a result, the group now has to cut staff in Austria. The locations in Kindberg and Kapfenberg are affected, where the workforce has to be reduced by around 250 employees due to weak demand and the reduced foam situation. The company management is currently negotiating a social plan that will be applied in autumn – probably in September or October.
Problems in the auto industry hit voestalpine
Voestalpine was particularly hard hit by the widespread downtimes in the European auto industry, where voestalpine is an important partner with its quality steel products. The sharp drop in demand has also had an impact on steel prices, with prices for the raw material iron ore simultaneously developing in opposite directions.
The only thing that gave hope in the months was the development in Asia, which showed that the pandemic can also be overcome and then things start to improve again. While the economy in North and South America experienced its worst downturn, the Chinese voestalpine locations were already at pre-crisis levels. With the end of the lockdown, a gradual recovery in demand also began in Europe.
Outlook: it can almost only get better
“We managed to adapt very quickly to the completely new situation. Despite the extremely challenging economic conditions, voestalpine achieved a positive operating result EBITDA in the 1st quarter 2020/21 (Note: € 158 million; -58%)
to achieve. This is primarily due to our consistent cost management and the rapid implementation of measures to optimize results across the entire Group. In addition, we still have sufficient liquidity, ”notes CEO Herbert Eibensteiner.
In the second business quarter, as is usual over the summer, seasonally somewhat weaker demand can be expected, for example due to customer downtimes. The strength as well as the sustainability of the economic recovery will therefore only be more fully assessable towards the end of the 2nd business quarter.
In view of the still prevailing volatility in an uncertain market environment influenced by Covid-19, the focus group continues to focus on cost management and earnings stabilization. At the same time, working capital management efforts remain high and investment spending low to strengthen both cash flow and balance sheet structure. “Against this background, the expectation from the beginning of the financial year remains that the voestalpine Group will generate an EBITDA of between 600 million and one billion euros in the financial year 2020/21,” emphasizes Eibensteiner.
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