NProducing sustainably – as CO2-neutrally as possible – is now a big issue for the industry. When investing, more and more investors are looking at how individual corporations present themselves in terms of sustainability. Steel production is one of the most energy-intensive branches of industry. The potential is correspondingly large when it comes to saving CO2 emissions. The Austrian Voestalpine, one of the largest companies in the Alpine country, wants to be one of the pioneers in this regard.
The technology group initially wants to spend 1.5 billion euros and build an electric arc furnace at each of its locations in Linz and Donawitz. The projects run under the name “greentec steel”. For them, construction is scheduled for 2024, while the start-up of the plants responsible, among other things, for melting and casting metals is scheduled for 2027. From then on, up to 30 percent of CO2 emissions should be saved in this way in the group. According to the group, it will not be the last time that old blast furnaces are to be replaced by electric arc furnaces. From 2030, Voestalpine plans to replace one blast furnace each in Linz and Donawitz. In the long term, the use of hydrogen is also being considered.
The future lies in hydrogen
Research is already being carried out into new processes for steel production and investments are being made in pilot projects. These include research projects such as the H2Future hydrogen pilot plant at the Linz site for the production and use of “green” hydrogen on an industrial scale, and the test facilities at the Donawitz site for CO2-neutral steel production through the direct reduction of ores with the help of hydrogen. In addition, research is being carried out into how unavoidable residual emissions can be stored and reused.
How important the focus on renewable energies can suddenly become became apparent last year when the war in Ukraine led to higher raw material and energy prices and there were even concerns in Europe that energy rationing could take place. However, Voestalpine was able to defy these problems. This was also possible because customers from the energy sector benefited from high oil and gas prices and therefore had more money available for investments.
Solid balance sheet and a good outlook
But despite all the research, what counts for shareholders and the stock market at the end (of a year) is what comes out of a listed company. At Voestalpine, the latest figures are correct. In the first nine months of the 2022/23 financial year (end of December), sales rose by 29.3 percent year-on-year to EUR 13.6 billion. Earnings before interest, taxes, depreciation and amortization increased by 23.4 percent to 1.9 billion euros. The bottom line was a profit of 864 million euros – an increase of 23.9 percent compared to the previous year. The view was also impressive.
This is also due to the fact that the management recently said that the actual business development had recently proved more resilient than originally forecast in view of the difficult economic forecasts. Inflationary pressure has decreased somewhat, while Europe’s energy supply is less characterized by a number of uncertainties. In addition, the feared deep recession has not materialized so far. The EBITDA forecast for the full year was therefore raised from EUR 2.3 to 2.4 billion to EUR 2.5 billion.
Attractive valuation
This data has recently been well received on the stock exchange since it was published. The Voestalpine share – which is notable for its volatile price development over a decade – has increased in value by around 27 percent since the beginning of 2023 and is therefore one of the top performers in the Austrian leading index ATX.
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For detailed view
And this after the paper had already embarked on a steep recovery course by the end of 2022. Compared to the September interim low of 17.07 euros, the plus is now around 85 percent. Nevertheless, the valuation of the Voestalpine share with a 2023 P/E ratio of less than 6 and a dividend yield of around 4 percent can still be described as attractive – especially since the share has been in a long-term upward trend since November 2022.