VIENNA Austrian specialty steel maker Voestalpine plans further efficiencies to make sure it hits mid-term targets in a tough trading environment, its chief executive told Reuters.
The new programme will be for several hundred million euros and focus on improving operations rather than restructuring, Wolfgang Eder said on Thursday.
Voestalpine's current 1 billion euro efficiency programme runs out at the end of the business year in March.
"There will be a follow-up package for sure," Eder said. The Linz-based group, which like rivals is adjusting to sharp commodity price falls, sector overcapacity and tough global competition, aims to increase revenues by more than a third to 15 billion euros ($17 billion) and its operational (EBIT) margin by 1 percentage point to 9 percent until 2020.
Eder said July figures made him feel confident that Voestalpine's traditional weak second quarter results were at least on the same level or even better as in the previous April-June period. Eder confirmed the group's target of reaching full-year EBIT close to last year's 888.8 million euros.
In response to a global steel glut, Voestalpine has changed its focus from pure steel making towards offering higher value specialised products. It has been investing heavily in new production sites and now makes finished parts for the automotive, aerospace and rail industries. Its products can be found in Volkswagen cars, Airbus planes and in switches for high-speed trains.
Traditional steel generates about 30 percent of revenue and as prices did not drop but stabilised after the summer period for the first time in five years, there was good reason to hope for "a further steel price increase in autumn", Eder said.
The CEO, who also heads the World Steel Association, said discussions with clients in several industries had encouraged him in his assessment.
Eder also voiced cautious optimism regarding oil and gas prices. "We will see the bottom in demand and in prices in the second half of our business year," he said, adding it would be too early to bet on a significant increase in demand from customers in the oil and gas industry.
Talks in Voestalpine's divisions about savings potentials have started and will be finished in February. One focus of the new programme were newly opened plants, which could be operated more efficiently than anticipated.
Voestalpine plans to invest around 1.1 billion euros in the current business year, a large part of which will be spent on new plants to serve automobile and rail customers while about 200 to 300 million euros will be reserved for acquisitions.
Aviation was one interesting sector for potential takeovers to expand services for plane makers like Boeing, but in an era of low interest rates, only family-run businesses were affordable for Voestalpine because - unlike financial investors - it had to follow economic criteria.
"The problem...is that money is available in unlimited volumes. We are not willing to pay utopistic prices," he said.
($1 = 0.8870 euros)
(Editing by Alexander Smith)