FRANKFURT (Reuters) - Salzgitter on Tuesday said its pre-tax profit could fall by nearly two thirds this year, pointing to cooling demand for steel amid increasing signs of a global economic slowdown.
Citing “gloomier sentiment and numerous economic and political uncertainties”, Salzgitter expects pre-tax profit of 125 million to 175 million euros (109.65-153.50 million pounds) this year, down from a preliminary figure of 347 million in 2018.
Shares in the group, Germany’s second-largest steelmaker after Thyssenkrupp, fell as much as 10.8 percent hitting their lowest level since July 2016. They were down 9 percent at 1600 GMT.
JP Morgan analysts last month pointed to rising recession concerns for the steel sector, citing deteriorating investor sentiment and economic data and putting the chance of a global recession over the next 12 months at 43 percent.
Jefferies analysts said: “As the Euro steelmaker most exposed to short-term sales contracts ... Salzgitter’s disappointing FY19 guide clearly reflects recent metal spread compression sparked by weakening steel prices and surging iron ore.”
Salzgitter’s forecast for its 2019 pre-tax profit is significantly below an estimate of 286 million euros based on Refinitiv data.
The company said it expects 2019 sales of more than 9.5 billion euros, up from a preliminary 9.3 billion last year.
The group will release full preliminary results on Feb. 27.
Reporting by Christoph Steitz; editing by Thomas Seythal and Jane Merriman