February 5, 2019 / 4:45 PM / 8 months ago

UPDATE 1-Salzgitter shares hit 2-1/2 year low on weak 2019 outlook

* Expects pre-tax profit of 125-175 mln euros

* Sees sales of more than 9.5 bln euros

* Shares hit lowest level since July 2016 (Recasts, adds shares, details)

FRANKFURT, Feb 5 (Reuters) - Salzgitter on Tuesday said its pre-tax profit could fall by nearly two thirds this year, pointing to cooling demand for steel amid increasing signs of a global economic slowdown.

Citing “gloomier sentiment and numerous economic and political uncertainties”, Salzgitter expects pre-tax profit of 125 million to 175 million euros ($143-$200 million) this year, down from a preliminary figure of 347 million in 2018.

Shares in the group, Germany’s second-largest steelmaker after Thyssenkrupp, fell as much as 10.8 percent hitting their lowest level since July 2016. They were down 9 percent at 1600 GMT.

JP Morgan analysts last month pointed to rising recession concerns for the steel sector, citing deteriorating investor sentiment and economic data and putting the chance of a global recession over the next 12 months at 43 percent.

Jefferies analysts said: “As the Euro steelmaker most exposed to short-term sales contracts ... Salzgitter’s disappointing FY19 guide clearly reflects recent metal spread compression sparked by weakening steel prices and surging iron ore.”

Salzgitter’s forecast for its 2019 pre-tax profit is significantly below an estimate of 286 million euros based on Refinitiv data.

The company said it expects 2019 sales of more than 9.5 billion euros, up from a preliminary 9.3 billion last year.

The group will release full preliminary results on Feb. 27.

$1 = 0.8758 euros Reporting by Christoph Steitz; editing by Thomas Seythal and Jane Merriman

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