April 11, 2014 / 9:00 AM / 4 years ago

Austria's Voestalpine close to margin targets - CEO

VIENNA, April 11 (Reuters) - Austrian steel and technology group Voestalpine expects to have nearly reached its core profit margin goal in the 2013/14 financial year that ended last month, Chief Executive Wolfgang Eder said.

He also told reporters that the group may have to scale back its “ambitious” target to boost sales to 20 billion euros ($27.8 billion) by 2020 from around 11.5 billion now.

Eder said he saw good prospects for Voestalpine to win more business from Russia’s mammoth South Stream gas pipeline project.

Voestalpine in 2012 set targets for an average margin of 9 percent for earnings before interest and tax (EBIT), 14 percent for earnings before interest, tax, depreciation and amortisation (EBITDA), and 15 percent for return on capital employed (ROCE).

“For the year just ended I expect for the EBIT margin an order of magnitude around 8 percent, perhaps a bit below 8 percent. That means we have not yet reached the average,” he said late on Thursday in remarks for release on Friday.

“The EBITDA margin should not be far from 14 percent and the return on capital employed I hope will be double-digit, that means reaching at least 10 percent. We have significant room to improve there. We also need an improved economy.”

The group had an EBIT margin of 6.8 percent and EBITDA margin of 12 percent through the first three quarters.

Voestalpine plans to revisit its 2020 goals at the end of next year to see whether they were still realistic against the uncertain economic backdrop, Eder said.

“As it appears today the upturn will probably still be somewhat restrained so I don’t rule out that we will revise the sales goal lower somewhat. What we certainly won’t change is the margin goal.”

Voestalpine will supply about half of the steel plates contracted from the OMK consortium for the first offshore tranche of Gazprom’s South Stream gas pipeline, the Austrian group said in January.

Deliveries from that deal should wrap up by July, Eder said. “Then we will have finished the first tranche. Soon we will enter negotiations for the second pipe and expect to have good chances,” he added.

Voestalpine is investing 550 million euros to build a sponge iron plant in the U.S. state of Texas, attracted by cheap energy prices.

The plant, Voestalpine’s biggest foreign investment to date, is part of its plan to boost sales through aggressive expansion in the Americas and Asia.

Eder said groundbreaking for the new plant was set for April 23, a day after it opens a plant in Carterville, Georgia, to make high-grade chassis parts, mainly for BMW and Mercedes.

“We are also in the process of perhaps building a second plant a bit further north,” Eder said.

$1 = 0.7204 Euros Reporting by Michael Shields; Editing by Erica Billingham

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