Voestalpine Shares Plunge Following Profit Warning

Austrian steel producer Voestalpine has issued a stark profit warning, revealing a substantial reduction in its full-year earnings forecast. The company now anticipates its EBITDA will reach only €1.4 billion, a downward revision of €300 million. This announcement triggered a significant sell-off, with the stock declining more than 10% since the start of the year.

The severe guidance adjustment stems from a combination of one-off charges and a worsening economic climate across Europe. Specific restructuring activities, including the sale of Buderus Edelstahl and the reorganization of its Automotive division, are expected to negatively impact earnings by approximately €100 million. An even greater blow comes from the deteriorating economic situation in Europe, which is projected to reduce earnings by a further €200 million.

Financial results for the first half of the 2024/25 fiscal year already illustrate the mounting pressure:
- Revenue fell to €7.8 billion
- EBITDA stood at just €650 million
- The Metal Forming Division experienced significant strain
- The automotive sector displayed persistently weak demand

Strategic Overhaul Amidst Financial Headwinds

Concurrent with the profit warning, Voestalpine is enacting a major strategic shift. The company has finalized the sale of Buderus Edelstahl to the investment firm Mutares and is undertaking a comprehensive restructuring of its German automotive operations. This strategic pivot involves the consolidation of several manufacturing plants, with the Birkenfeld site slated for complete closure.

Should investors sell immediately? Or is it worth buying Voestalpine?

While this restructuring is designed to secure 2,000 jobs in Germany, the immediate financial impact is substantial, further weighing on the company's balance sheet in the short term.

Isolated Strengths Provide Limited Solace

Despite the overwhelmingly negative outlook, a few segments continue to demonstrate resilience. The Railway Infrastructure, Aerospace, and Warehouse Technology divisions are all reporting stable and robust performance. Furthermore, Voestalpine has taken steps to fortify its financial position by successfully issuing a green bond valued at €500 million.

The critical question remains whether these stable business units can generate sufficient momentum to steer the entire conglomerate through the ongoing steel industry crisis. A clear indicator of financial stress is the company's free cash flow, which has been halved from an initial projection of €200 million down to just €100 million.

Market participants will be closely monitoring the upcoming quarterly reports to determine if these strategic and operational measures will stabilize the company or if Voestalpine will continue to be pulled downward by the challenging conditions in the European steel market.