Rautaruukki Oyj (RTRKS) fell the most in more than two weeks in Helsinki trading after UBS AG started coverage by recommending clients sell the shares as the Finnish steel producer struggles with competition.
Rautaruukki declined as much as 3.7 percent, the most since Aug. 20, and lost 3.5 percent to 5.87 euros at 12:35 p.m. in the Finnish capital. Trading volume was 86 percent of the three-month daily average.
“The structural disadvantage associated with the group’s steel and construction business is making it difficult for the group to achieve pricing power,” Carsten Riek, an analyst at UBS in London, said in a note. “Given the export nature of the group’s steel business, we believe the company has to compete with Russian and Swedish players at the expense of profits.”
UBS started coverage of Rautaruukki with a sell rating and a 12-month price estimate of 4 euros. That pushed the average price estimate of 15 analysts to 4.96 euros today, the lowest in a month, according to data compiled by Bloomberg.
Rautaruukki has racked up losses of 183 million euros ($240 million) over the past two years, posting negative earnings in eight consecutive quarters, according to data compiled by Bloomberg.
“The prevailing overcapacity in the steel industry in Europe means that the price development for the whole year, especially with regard to standard steel products, depends not just on demand, but also on the price development of main raw materials,” Chief Executive Officer Sakari Tamminen said on Aug. 8. The euro-area recession that ended in the second quarter has also weighed on demand, he said.
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