Investors punish Voestalpine for latest profit warning

* Annual EBIT guidance lowered to 750 mln euros

* Provisions connected to 2017 German cartel investigation

* Difficulties in U.S. production line ramp-up

* Shares drop as much as 8 percent (Adds shares, analysts, cartel office, ThyssenKrupp)

By Kirsti Knolle

VIENNA, Jan 17 (Reuters) - Voestalpine blamed operating problems in the United States and provisions from a German cartel investigation for its second profit warning in four months, sending shares in the Austrian steelmaker 8 percent lower on Thursday.

The latest warning risks tarnishing the legacy of Chief Executive Wolfgang Eder who bows out in July after 15 years in charge.

Eder has been credited with transforming a traditional steelmaker into a global specialist supplying finished parts to the automotive, aerospace and rail industries.

However, difficulties with a new assembly line for auto components at a plant in Cartersville, Georgia, were one factor behind Voestalpine's big profit downgrade.

The group lowered its full-year guidance for earnings before interest and tax (EBIT) to 750 million euros ($855 million), after having reduced its forecast in October to just under 1 billion euros.

"With these issues coming on the heels of a choppy ramp-up of Voestalpine's new hot briquetted iron plant in Texas, we fear that the reputation as a best-in-class-operator has been hit hard," Jefferies analysts said in a note.

The opening of the $1 billion plant in Texas in 2016 which went over budget and had to be shut down several times since then, was part of Eder's strategy to grow internationally.

Eder, who will be succeeded by company insider Herbert Eibensteiner in July, also established close ties to German carmakers and followed them in expanding production overseas. Revenues from the auto industry now account for one third of revenues, making Voestalpine vulnerable to a slowdown in that sector.

CARTEL PROBE

In figures published late on Wednesday, Voestalpine warned that preliminary nine-months EBIT was much lower than expected. The figure came in at 525 million euros versus the 712 million euros expected, according to Refinitiv Eikon data.

Higher costs for shifting orders internally and to external suppliers lead to a provision, that UBS analysts see in the "mid-double-digit-million euro range".

The Linz-based group also made provisions in connection with a 2017 probe by the German competition watchdog into suspected violations of antitrust laws in the market for heavy plates, which includes ArcelorMittal, Salzgitter and ThyssenKrupp.

The latter blamed risk provisions for the probe as a main reason for its profit warning in November.

Voestalpine's announcement could be an indication that the German authority could impose penalties in coming months, analysts said. The cartel office declined to comment.

A Voestalpine spokesman declined to quantify the amount of the provisions or the extra costs for the transfer of orders. UBS analysts estimate the cartel provision to be the at around 125 million euros.

Voestalpine shares, which lost nearly half their value last year, were 6 percent down at 1230 GMT. ($1 = 0.8779 euros) (Reporting by Kirsti Knolle, additional reporting by Alexandra Schwarz-Goerlich in VIENNA, Tom Kaeckenhoff in DUESSELDORF, editing by Alexander Smith and Keith Weir)

First Published: 2019-01-17 01:00:49
Updated 2019-01-17 14:51:26


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