About two weeks ago, voestalpine had stopped investors with full-year earnings warning in difficult times, due to the interaction of several negative factors such as trade gap, the weaker automotive sector, the highest cost in North America and a fire in the Texas. Thanks to higher sales prices, revenues grew by 5.2% to 3.2 billion euros, despite the fact that sales volume declined in the second quarter. By contrast, EBIT decreased by almost 40% to 156 million due to higher costs, especially in the US. The quarterly surplus amounted to just 84 million euros, much lower than our own estimates of consensus.
Profitability prospects for consolidated EBIT of just € 1 billion were completed with EBITDA just below € 1.8 billion.
Outlook. As mentioned in our last comment on profit warning, some of the trends that triggered the profit warning will continue to accompany voestalpine in the coming quarters. The visibility of the European automotive industry (WLTP, diesel strategy, US tariffs) will remain low for some time and will affect price negotiations in 2019. Demand for tool steel in China is also weakening. Also on the cost side there are pressures from higher raw material prices and logistics costs. Despite the current low price level, we feel that the feeling for the steel sector and therefore the stock of Voestalpine will remain negative and unstable for some time.