voestalpine pins lowered profit forecast on Bartow plant (US)

“An ongoing shortage of skilled workers in the region has had an impact on the fact that we have not been able to find and maintain enough qualified personnel to process these orders in time,” a voestalpine AG representative told The Daily Tribune News.

On Wednesday, voestalpine AG gave investors some discomforting news — not only did the Linz, Austria-based manufacturer miss its nine-month earning forecast by 187 million euros (equivalent to roughly $213 million), the international steel company also announced it was lowering its full-year profit forecast from roughly 1 billion euros ($1.13 billion) to about $750 million euros ($854.1 million.). Such marks the second time voestalpine has lowered its profit forecast in the current fiscal year. By Thursday, voestalpine shares were down by as much as 8 percent — a substantial decrease for a company that already saw its shares lose almost half their value over the last year. According to voestalpine AG Head of Investor Relations Peter Fleischer, subpar production numbers at the manufacturing facility in White certainly played a part in those reduced earning projections.

“This is due, on the one hand, to a significantly higher impact on earning from the ramp-up of automotive activities in voestalpine Automotive Components Cartersville, USA,”  a Jan. 16 letter to investors stated, “as well as related one-off effects from provisions due to external transfers of orders.”

The Daily Tribune News reached out to company spokesman Peter Felsbach, who deferred comments to voestalpine’s group communications department.

“We are currently facing challenges in the continuous expansion of our largest automotive plant in the United States in Cartersville,” a representative from voestalpine AG told The Daily Tribune News in an email. “This has led to issues in the supply of our customers and impacts on earning due to external order relocations.”

The representative, however, did not have a specific monetary estimate for how much delayed production at the local plant has impacted overall voestalpine revenue.

“Several production lines for high-quality automotive products were ramped-up in parallel in the last five years, due to persistent strong demands of our customers,”The Daily Tribune News was told by a voestalpine representative. “In retrospect, the reasons for additional costs have primarily been the processing of several large orders within a very short time in a still very young organization and a too ambitious ramp-up planning.”

But that’s not the only problem voestalpine is experiencing at its facility in Bartow County. Simply put, representatives of the company said they just can’t find employees capable of meeting production demands.

“An ongoing shortage of skilled workers in the region has had an impact on the fact that we have not been able to find and maintain enough qualified personnel to process these orders in time,” The Daily Tribune News was told.

Bartow County Commissioner Steve Taylor said he hasn’t spoken with the management at the local plant in about six months, but he is well aware of their personnel issues.

“I’ve assumed and still assume that they’re on the right track to get those skilled workers,” he said. “I know that the labor pool is small right now, but I’m optimistic they can find the workers they need, because their average pay is better than the market.”

The disappointing Bartow production numbers, however, are far from voestalpine’s only operational woes. Among other difficulties, the company has experienced consistent problems at its $1 billion iron plant in Portland, Texas, which has been beset with cost overruns and at least two federal lawsuits since opening in 2016.

Meanwhile, voestalpine’s corporate headquarters in Europe was raided in 2017 as part of an antitrust investigation, which some financial analysts suggest could produce stiff financial penalties over the next few months. One firm, UBS, projects the potential fines to top out at around 125 million euros (nearly $142 million.)

It wouldn’t be the first time voestalpine faced such sanctions.

German officials investigated the company on accusations of price-fixing in 2015, which ultimately led to six companies amassing the equivalent of about $232 million in fines. While voestalpine was spared any penalties during that investigation, the company was fined 6.4 million euros ($7.26 million) for their part in a 2012 rail cartel case.

And uncertainty abounds regarding the company’s organizational structure, with long-time CEO Wolfgang Eder set to step down in July — another variable that’s causing investors of the European steel giant some considerable consternation.

Taylor, however, said he’s not feeling so pessimistic about voestalpine’s future.

“This is a huge European company. I’ve always been told they’re very strong financially … it seems like they’ve got really good management,” he said. “We’re actually not apprehensive at all, because Bartow County is now such a diverse economy that I think no single country investing in Bartow, or no single industry, could really hurt us that bad.”

The $62 million manufacturing plant opened in White in 2014. To spur its construction, the Cartersville-Bartow County Joint Development Authority gave voestalpine a litany of incentives, including a 15-year abatement on real property taxes and a 10-year abatement on personal property taxes.

Taylor said the county is likely to provide additional financial assistance — such as bonds — to voestalpine in the future, albeit with a few conditionals.

“There is no plan to offer incentives to voestalpine, because they haven’t come to us and shared their future expansion plans with us,” he said. “But when they do, we will of course consider it just like we have in the past, if enough jobs were made available with a high enough average wage.”

The facility expanded operations in 2016, with the goal of adding 150 new employees. The voestalpine website states the company is hopeful to have 450 workers onsite by next year.

Despite the ongoing difficulties, however, voestalpine representatives said the company has no plans to scale back production at the Bartow facility, nor reduce its total workforce projections.

“We are currently working hard on overcoming the challenges and get back on track with our orders,” The Daily Tribune Newswas told. “We are very proud to see ourselves as a local producer in the Cartersville community and have always experienced the best possible support by the local authorities. From today’s point of view we are therefore adhering to our expansion plans and are continually seeking to hire qualified employees from the area.”

And doing that, voestalpine representatives said, may require the company to take a more active role — and bigger financial stake — in the community itself.

“Thus, the implementation of specialized educational programs and respective infrastructure in the region is and will be of utmost importance in the region,” a company rep stated in an email, “in order to secure local jobs and production.”

Source:

http://www.daily-tribune.com/stories/voestalpine-pins-lowered-profit-forecast-on-bartow-plant,21138

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