In October 2014 Voestalpine planned to start building a premium steel and specialised steel product plant in Yinchuan with local partner Kocel Machinery, pumping 140 million euros ($161 million) into the project. (Credit Photo @ Voestalpine)
Austrian high-end steel maker Voestalpine might not stick to its plan to start building a specialised steel plant in China this year but still wants to expand there in the long term, its chief executive told Reuters in an interview. Voestalpine said in October it planned to start building this year a premium steel and specialised steel product plant in Yinchuan with local partner Kocel Machinery, pumping 140 million euros ($161 million) into the project. The plant was still an option but “we will take our time to assess how we will proceed from here”, Wolfgang Eder said, adding Voestalpine might choose another location. He gave no details. European car makers such as Volkswagen and BMW have seen their business slow in China as demand drops. Voestalpine has been relatively shielded from the slump in Chinese markets and cheaper Chinese steel exports as it produces premium steel and steel products, mainly for the transport and energy sectors, which are otherwise hard to get in China. “Nothing has changed for us in terms of China’s attractiveness in the long term,” Eder said, adding it was not “unrealistic” that Voestalpine might build another 10 plants in China by 2020. Voestalpine is keen to expand in Asia, where it generated around 783 million euros of revenue — or 7 percent of the group total — in 2014/15, of which 300 million was in China alone, where it already has around two dozen sites. It has said it aims to nearly triple annual revenue there to around 2 billion euros by the end of 2020 and invest between 400 million and 500 million euros in the region.
LOW COMMODITIES PRICES WEIGH ON SALES TARGET
Low prices for commodities including iron ore, aluminium, coal and titanium have derailed Voestalpine’s revenue target of 20 billion euros by 2020/21, Eder said. In 2014/15 Voestalpine’s revenues reached 11.2 billion euros. Still, he confirmed a 9 percent margin target for earnings before interest and tax (EBIT) and 14 percent for earnings before interest, tax, depreciation and amortisation (EBITDA) by 2020/21, adding the latter may be hit before then. He also confirmed Voestalpine’s EBITDA and EBIT this financial year are on track to beat last year’s 1.53 billion euros and 886.3 million, respectively.