A massive meltdown in demand for its steel and metal products in almost all countries and sectors due to Covid-19 is reported by voestalpine Group for the three months ending June 30. A key provider of electrical steel for the automotive industry, especially for motors in hybrid and electric vehicles, the company saw its profits plummet amidst a 28% drop in revenues. As lockdowns ended in many areas near the end of the period, however, signs of recovery are evident with business in China coming back first.
Demand caved in not only from the standstill of the automotive industry but also the general weakness of the industrial sector, especially in Europe where the group generates about two-thirds of its revenue. All four of its divisions felt the pain. Steel accounts for about a third of its business, the company also makes specialty metals and engineered metal products.
The strong downturn in demand led to a decline in steel prices which, due to the strength of China’s steel industry, did not go hand-in-hand with a decline in iron ore prices, thus intensifying the negative impact on earnings. Whereas the economies in North and South America experienced substantial downturns as well, the group’s locations in China returned to pre-pandemic capacity utilization during the reporting period.
“We managed to adapt very quickly to the completely new environment,” said Herbert Eibensteiner, chairman of the management board. Profits sank by 58% but the group still reported EUR 158 million in earnings for the period.
“The technology segments rail technology and high-bay warehouses continued to develop along an absolutely solid trajectory in this difficult environment. The latter benefited, in particular, from booming online commerce. Due to the restrictions on air travel and the global reduction in the demand for energy, however, the aerospace as well as the oil and natural gas industries were hit particularly hard by the ramifications of the Covid-19 pandemic.”
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