Voestalpine Sets Aside $268 Million on German Rail Antitrust

Voestalpine Sets Aside $268 Million on German Railway Antitrust
A Voestalpine AG steelworker monitors molten steel at the company's plant in Linz, Austria. Photographer: Dieter Nagl/Bloomberg

March 14 (Bloomberg) -- Voestalpine AG, Austria’s biggest steelmaker, agreed to set aside 205 million euros ($268 million) in provisions for risks stemming from antitrust proceedings pertaining to its German TSTG Schienentechnik GmbH & Co KG unit.

The company also decided to close the Duisburg-based unit by year-end as it is no longer economically viable, according to a statement late yesterday. The provision will be “reflected” in fiscal 2012, which is scheduled to be reported on May 30, the company said. “From today´s perspective, this reserve will cover all costs related to the closure of rail production in Duisburg, as well as all risks associated with the antitrust proceedings.”

The Austrian steelmaker, led by Chief Executive Officer Wolfgang Eder, said last year that it was the whistle-blower in a German investigation over possible antitrust violations in the railway steel market. While the company has said that it expects to be exempt from any fines because of its whistle-blower status, this wouldn’t excuse it from civil law claims.

“The charges do not come as a surprise,” said Rochus Brauneiser, an analyst at Kepler Capital Markets in Frankfurt, who rates Voestalpine at buy. Eder told analysts that charges from a rail settlement would come on top of an expected 10 percent decline in earnings before interest and tax, according to Brauneiser.

Eder said on Nov. 17 that Ebit for the year ending March 31 would be around 900 million euros. That was reduced to about 700 million euros after the railway unit provisions, Peter Felsbach, a spokesman for Linz-based Voestalpine, said by e-mail today.

“We estimate that the closure of TSTG increases the Ebit margin of the Railway Systems from 9.9 percent in 2011-12 to 11 percent, all else equal,” Kepler’s Brauneiser said in a note to customers.

Voestalpine declined 0.4 percent to 26.55 euros at the 5:30 p.m. close of trading in Vienna. Shares have advanced 22.5 percent this year.

To contact the reporters on this story: Zoe Schneeweiss in Vienna at zschneeweiss@bloomberg.net; Richard Weiss in Frankfurt at rweiss5@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net