February 7, 2013 / 7:21 AM / 5 years ago

UPDATE 2-Voestalpine keeps profit goal despite slow economy

* Keeps FY outlook but conditions getting tougher

* Q3 profits rise in line with estimates, cost cuts help

* Shares fall 0.6 percent (Adds shares, comments from CEO and analyst)

By Georgina Prodhan

VIENNA, Feb 7 (Reuters) - Austrian steelmaker Voestalpine stuck to its outlook for an earnings gain for the full year to end-March despite what it called tougher market conditions, as it reported higher quarterly profits due to cost cuts.

Voestalpine is insulated from weak demand for commodity steel thanks to its focus on special steels and other niche products. It is embarking on a global growth plan at a time when most steelmakers are cutting costs.

Chief Executive Wolfgang Eder said on Thursday plants were still running at more or less full capacity.

The specialty steelmaker said measures taken to calm markets in the United States and Europe were helping the economic mood, while there were indications of a recovery in China, echoing a more optimistic outlook from ArcelorMittal, the world’s largest steelmaker.

But Voestalpine, whose main customers are carmakers, said a global economic improvement in the real economy was unlikely before the second half of 2013, later than it had hoped, although inventory adjustments might help some industry segments in the short term.

Lower inventories helped lift prices in the third quarter to end-December, Voestalpine said, preventing a bigger decline in revenues, which fell 6.2 percent to 2.72 billion euros ($3.7 billion), below analysts’ average estimate in a Reuters poll.

The company reiterated it expected earnings before interest, tax, depreciation and amortisation (EBITDA) of about 1.4 billion euros and EBIT of around 800 million for the year to end-March, up from 1.3 billion and 704 million last year.

“It is self-evident that these targets are ambitious, but we stand by them,” Eder told journalists on a conference call.

Voestalpine said it would decide on the location of a new 500 million euro plant in North America by the end of February. The plant would take advantage of cheap energy prices there to produce iron ore for the company’s steel production in Austria.

Voestalpine shares fell 0.6 percent to 26.84 euros by 1208 GMT, underperforming the European basic resources index, which fell 0.4 percent.

Analysts expressed confidence it would meet guidance despite its more cautious tone.

“We believe that management clearly had built some buffer into their budget, and Voest has a track record of bringing back expectations and still overachieving,” Deutsche Bank analyst Bastian Synagowitz wrote in a note.

In the third quarter, EBIT rose by a fifth to 174.4 million euros and EBITDA rose 9.6 percent to 321.9 million euros, in line with expectations, as Voestalpine reaped the rewards of a restructuring it undertook ahead of most competitors.

Eder said a programme to cut 380 million euros of costs in the steel division by early 2013 was on track and that a new cost-cutting programme across the company’s four divisions should save 80 million to 100 million euros annually over the next year.

The company also makes specialty steel for railways, energy equipment, appliances and aviation parts.

$1 = 0.7387 euros Editing by Michael Shields and Jane Baird

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