voestalpine recently lowered its profit expectations for the current 2024/25 financial year (as of the end of March). After 1.7 billion euros, EBITDA – earnings before interest, taxes, depreciation and amortization – is now only expected to be 1.4 billion euros. That is 300 million euros less, but it is still considerable in the second year of the recession, said Eibensteiner.
Energy costs are one of the Linz group’s biggest problems. Even before the corona pandemic in 2019, natural gas was around one and a half times more expensive than in the USA. As a result of the Ukraine crisis, gas is now 5.7 times more expensive than in the USA. The price of electricity is around three times as high as in the USA. “This is causing us difficulties here in Europe, in addition to labor costs and regulatory costs. This is also the reason why Europe is falling behind in competitiveness in these markets.”
Customers save when buying a car
Demand in the automotive sector is declining. “The switch to electromobility is not going as well as expected. And in the meantime it is also the case that end customers are saving more and investing less in buying a car.” That’s why the German subsidiary Buderus Edelstahl was sold a few days ago. This should result in an improvement in earnings in the High Performance Metals Division by 30 million euros from the next financial year. Buderus has a mediocre product portfolio and difficult conditions, “we have to separate ourselves from that.”
Read more: voestalpine sells German subsidiary Buderus Edelstahl
The Voest boss is also worried about protectionism. “Every year, including this year, there are around 4,000 new trade barriers worldwide. These are tariffs, these are new standards and so on.” Eibensteiner criticized stricter regulations in the EU. “We now have 50 employees working on the reports – from the CSRD (“Corporate Sustainability Reporting Directive”) to the Supply Chain Act and so on.”
Skilled labor shortages remain
In addition, network expansion in Europe is making slow progress and the shortage of skilled workers will remain structural, even if the situation eases in the near future due to the weak economy.
The Voest boss is convinced that the hydrogen for “green” steel will largely not come from Central Europe in the future. “But in the next few years there will hopefully be a network in Central Europe in time where hydrogen from Norway and other countries actually comes to us in Central Europe.”
According to Eibensteiner, the Linz and Donawitz locations in Styria are not at risk. “You can’t relocate a steelworks that easily.”
Interview with Wolfgang Eibensteiner, CEO of voestalpine AG
Interviewer: Thank you for joining us today, Wolfgang. Recently, voestalpine revised its EBITDA expectations for the 2024/25 financial year from €1.7 billion to €1.4 billion. What factors contributed to this adjustment?
Eibensteiner: Thank you for having me. The downturn in our profit expectations is primarily due to soaring energy costs, particularly natural gas and electricity, which have greatly impacted our operations. Before the pandemic, gas prices were already significantly higher than in the USA, but the Ukraine crisis has further exacerbated this. Additionally, we’re facing labor and regulatory costs that undermine our competitiveness in Europe.
Interviewer: That’s a concerning trend. You mentioned the ongoing transition to electromobility is slower than anticipated, and consumer spending is down. How is that affecting your operations?
Eibensteiner: The automotive sector has seen a decline in demand, which affects our subsidiaries heavily involved in that market. The recent sale of Buderus Edelstahl was a strategic decision aimed at streamlining our operations and improving earnings in our High Performance Metals Division by €30 million in the next financial year. We must adapt to the changing market conditions and focus on our most competitive offerings.
Interviewer: Beyond the economic challenges, you’ve raised concerns about increasing trade barriers and regulations. How do you see this impacting voestalpine and the broader European market?
Eibensteiner: Every year, we’re witnessing the introduction of new trade barriers, which complicates international competition. The EU’s stricter regulations, including the CSRD and the Supply Chain Act, essentially necessitate more resources for compliance—currently, we have 50 employees dedicated to reporting alone. This regulatory burden, combined with the challenges posed by protectionism, makes it increasingly difficult for European companies to compete globally.
Interviewer: Turning to the future, you mentioned the potential for a hydrogen infrastructure in Central Europe. What are your expectations here, considering the current energy landscape?
Eibensteiner: I’m optimistic that, despite the current challenges, we will see significant progress in developing a hydrogen network in Central Europe over the next few years. However, it’s likely that the bulk of the green hydrogen will need to come from countries like Norway. A robust hydrogen infrastructure will be critical for our transition to sustainable steel production.
Interviewer: a persistent issue in Europe has been the shortage of skilled labor. Do you foresee any changes in this area given the current economic climate?
Eibensteiner: The skilled labor shortage is a structural challenge that will remain even as the economic situation stabilizes. While we may see a temporary easing due to lower demand, the long-term solutions will require a concerted effort from industry and education sectors to attract talent and invest in training.
Interviewer: Thank you, Wolfgang, for shedding light on these pressing issues facing voestalpine and the broader industry.
Eibensteiner: Thank you for having me. It’s crucial to continue these conversations as we navigate these challenging times.
He importance of hydrogen for green steel production. Can you elaborate on your vision for hydrogen sourcing in Central Europe?
Eibensteiner: Certainly. I believe that while Central Europe may not be the primary source for hydrogen in the near future, there is a strong potential for developing a robust network to bring hydrogen from regions like Norway and other countries to our local production sites. This is crucial as we transition towards more sustainable steel production methods, and I’m hopeful that we will see significant progress in establishing this infrastructure over the next few years.
Interviewer: Lastly, skilled labor shortages continue to pose challenges. Do you foresee any improvement in this area, particularly given the current economic constraints?
Eibensteiner: While there might be some easing due to economic conditions, the shortage of skilled labor is likely to remain a structural issue in the long term. We need to invest in training and education to prepare the workforce for future demands, particularly as our industry evolves with technology and sustainability initiatives. Addressing this shortage is vital for maintaining competitiveness in the global market.
Interviewer: Thank you for your insights, Wolfgang. It sounds like voestalpine is navigating a complex landscape, but your focus on adaptation and innovation is commendable.
Eibensteiner: Thank you, and I appreciate the opportunity to share our perspective. We remain committed to overcoming these challenges and seizing opportunities as they arise.
