Voestalpine Advances as Higher Earnings Drive Dividend Increase

Voestalpine AG, Austria’s biggest steelmaker, rose the most in nine months in Vienna trading as a gain in profit underpinned a 13 percent jump in the dividend.

Voestalpine climbed as much as 5.8 percent, the biggest increase since Sept. 6, and traded up 5.5 percent at 26.75 euros as of 2:04 p.m. local time. The company proposed to raise the dividend by 10 cents to 90 cents a share, exceeding the estimates of 19 of 21 analysts surveyed by Bloomberg.

“Voestalpine was able to beat expectations in a very challenging environment,” Christian Obst, an analyst at Baader Bank in Unterschleissheim, Germany, wrote in a note to clients. That reflects the “strong strategic positioning of the company and underlying operating performance.”

Net income rose by a third to 444.9 million euros ($582 million) in the year through March, the company said today. It benefits from selling high-quality specialized steel in long-term contracts to clients in the transport, energy and consumer-product industries. Profit a year earlier was hurt by provisions for an antitrust fine following a probe into railway steel.

“Voestalpine is doing well,” Chief Executive Officer Wolfgang Eder told reporters in Vienna. “We boosted profit and reduced debt, so we’re heading in the right direction.”

Free cash flow rose to more than 500 million euros in the year, allowing Voestalpine to reduce net debt to 2.26 billion euros, or 45 percent of equity, while raising the dividend. The payout must be approved at the annual general meeting on July 3.

‘Remarkable’ Yield

“For the last 18 years, we had an average dividend yield of almost 4 percent,” Eder said. “For a cyclical company, that is remarkable.”

The steelmaker is expanding capacity in the U.S. with a 550 million-euro iron-ore pellet factory in Texas. Back home in Europe, Voestalpine has scaled back its forecast for a recovery, saying in April that budget cuts were weighing on demand.

Voestalpine plans to boost revenue from regions outside Europe to at least 40 percent from 23 percent in the long term, Eder said, without specifying a timeframe. “This is also where our investment focus will be,” he said.

Eder expects earnings before interest, tax, depreciation and amortization of about 1.45 billion euros in the current fiscal year, little changed from a year earlier. He sees sales of 11.5 billion euros to 12 billion euros, matching analyst estimates.

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