August 7, 2019 / 6:33 AM / 4 months ago

UPDATE 1-Steelmaker Voestalpine's core profit falls as auto sector weighs

(Adds detail, background)

VIENNA, Aug 7 (Reuters) - Austrian specialty steelmaker Voestalpine AG on Wednesday reported a 28% drop in its first-quarter core profit, weighed down by a “slumping” auto industry and weaker demand for steel products.

The Linz-based group, which produces flat steel products for the automotive, energy and railway industries, said earnings before interest, tax, depreciation and amortisation (EBITDA) fell to 370.9 million euros ($415.6 million) in the three months through June from 513.0 million euros a year earlier. It still expects EBITDA to be roughly flat in the 2019-20 business year that ends in March but it said that task had only become more challenging, adding that “the macroeconomic environment has clouded over significantly” since March. It is also intensifying efforts to cut costs and improve efficiency. Europe’s steel sector is under pressure as the auto industry, one of its main customers, is slowing and steel imports increase in the wake of U.S. tariffs. ArcelorMittal, the world’s biggest steelmaker, cut its forecast for global steel demand last week. Profitability has also been squeezed by lower steel prices and higher raw material costs, particularly for iron ore.

“The management board of Voestalpine AG continues to work in a difficult environment, particularly with respect to the development of ore and steel prices, on achieving EBITDA for the current business year that is comparable to that of the previous business year even though the uncertainties have mounted since the start of the current business year,” it said. ($1 = 0.8924 euros) (Reporting by Francois Murphy; Editing by Rashmi Aich and Louise Heavens)

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