voestalpine AG — Capital/Financing Update 1998

Nov 20, 1998

News Details

Ad-hoc | 20 November 1998 10:35

Ad hoc-Service: VOEST-Alpine Stahl AG 2

—————————————————————— Ad hoc-Service: VOEST-Alpine Stahl AG 2 Ad hoc-Mitteilung übermittelt durch die DGAP. Für den Inhalt der Mitteilung ist allein der Emittent verantwortlich. —————————————————————————— 2 Investments in a further consolidation of quality leadership As scheduled, the continuous annealing line reached full production capacity in summer 1998. This marked the conclusion of the last major project in the 1995 – 1998 special investment programme. However, during the first half of the 1998/99 financial year, a number of new investment decisions were taken. The largest individual undertaking at VOEST-ALPINE STAHL LINZ GmbH will be the optimisation of the liquid steel phase in the LD 3 steelworks. This project is due for completion in the third quarter of 2000 and will cost ATS 1.2 billion. Another project that was also agreed in May 1998, is the installation of a second gas and steam power generation facility in the VOEST-ALPINE STAHL LINZ GmbH power station. Due to excellent demand, the Linz plant of VOEST-ALPINE EUROPLATINEN GmbH for the production of laser welded tailored blanks, which was first completed in 1997, is currently being enlarged with a third laser welding line. Production will start at the end of 1998. The conversion of the existing steel mill into a compact steel mill, represents a milestone for future crude steel production in Donawitz. Completion is planned for May 2000, and the work is currently on schedule. The investment volume totals ATS 1.8 billion. The compact steel mill will mean a 10% reduction in production costs per metric ton. In August 1998, the installation of the CPE plant (Cross roll Piercing and Elongating) at VOEST-ALPINE STAHLROHR Kindberg GmbH was finished. In the meantime, the run-up phase has progressed smoothly and according to plan. Within the scope of the ‘Finishing 2000’ project at the VOEST- ALPINE SCHIENEN GmbH, rail production in Donawitz was equipped with a new type of control technology and the latest quality and precision assurance systems. Investments by the Group in fixed assets during the 1998/99 financial year will total some ATS 3.5 billion. Outlook a cyclical downturn or a lasting crisis ? The slump in the international steel markets continued in the fourth calendar quarter of 1998 and all-time lows are indicated for lower-quality product group prices by the first quarter of 1999 at the latest. This means that prices will be clearly below those of the 1993 steel crisis year. Even now, spot market prices for commodities are down by as much as 40% (!) as compared with spring 1998. As a result, the second half of the VOEST-ALPINE STAHL Group 1998/99 financial year (October 1998 – March 1999) will be characterised by an extremely negative general situation. Nonetheless, it may be assumed that due to the contracts concluded on a yearly basis, the high-quality product range and strict cost management, the current third quarter will close with a clear profit, although not quite at the level of the result for the preceding quarter. At present, serious estimates of developments in the fourth quarter of the financial year are impossible, although a further deterioration in the price and quantity situation is indicated. The decisive question for the 1999 calendar year and the 1999/2000 VOEST-ALPINE STAHL AG financial year, is the extent to which the rapid deteroiation in European steel prices will lead to a lasting reduction in imports. This would form the basis for price stabilisation in the first half of the 1999 calendar year. However, this scenario assumes an easing of the situation in the crisis regions and no cyclical downturn in the USA. If this does not materialise, then a developing crises in the European steel industry with corresponding price and quantity pressure cannot be excluded in 1999. In closing, some remarks concerning the current situation regarding efforts towards the horizontal expansion of the Group. Discussions concerning an investment in the Huta Tadeusza Sendzimira SA (HTS SA), Poland, have been continuing for some time. Recently, the company, together with its partner Koninklijke Hoogovens NV, signed an agreement, which permits this common consortium to carry out exclusive negotiations with HTS SA until the end of January 1999. The subject of these talks with HTS SA is the taking of a majority holding by the consortium in an HTS STAHL company, which would be disincorporated from HTS SA. At the same time, parallel discussions are also being held concerning the inclusion of HUTA KATOWICE SA into the solution for future flat steel production in Poland. Linz/ Vienna, November 20, 1998 Ende der Mitteilung