June 6, 2018 / 7:00 AM / in a year

UPDATE 2-Austrian steelmaker Voestalpine urges caution after bumper year

* Full-year EBIT at 1.18 bln vs avg poll of 1.16 bln

* Full-year revenue at 12.9 bln vs avg poll of 12.8 bln

* Proposes dividend of 1.40 euro per share (Adds U.S. business, shares, CEO)

By Kirsti Knolle

VIENNA, June 6 (Reuters) - Austrian steelmaker Voestalpine profits to stay flat in the business year 2018/19 after the previous year’s surge, impeded by a U.S. shift towards protectionist trade policies and signs of a slowing economy in Europe.

Strong demand from the automotive industry helped the group increase 2017/18 operating profit by 43 percent, lifting its shares on Wednesday by up to 4.7 percent.

Voestalpine has specialised in finished parts for the automotive, aerospace and rail industries in recent years to deal with strong competition and overcapacity in the sector.

The group, which opened a $1 billion plant in Texas in 2016 as part of its strategy to grow abroad, plans to increase its payout to shareholders by 27 percent to 1.40 euro per share.

Chief Executive Wolfgang Eder told a news conference it was too early to talk about next year’s dividend but suggested that an upper limit for the dividend had been reached.

Helped by continued strong demand in Europe and China, Eder said he hoped for stable earnings in the 2018/19 business year that ends in March.

“Europe was characterized by a broad economic upswing last year, and basically this has not changed even if some indicators point to a slowdown,” Eder said, adding that political developments in Italy and Spain could also cloud prospects.

He said protectionist measures in the United States could affect Voestalpine’s business directly and indirectly.

“The impact and the collateral damage of the American protectionist policy, that’s the big question mark,” he said.

Voestalpine generates two thirds of its revenue in the European Union, about 10 percent in the U.S. and 8 percent in Asia.

Most of its 47 U.S. sites work with domestic raw material. But around one third of the revenue derives from steel imports, as Voestalpine needs certain flat steels for car components, tool steels and special alloys for aviation customers and ultra thin strip steels for scalpels.

Washington imposed tariffs of 25 percent on steel imports from the European Union, Canada and Mexico recently.

CEO Eder, who will step down in summer 2019 and hand over to steel division chief Herbert Eibensteiner, said the group plans to invest about 900 million euros this business year.

In addition to continuing strong demand from the automotive industry, Voestalpine expects growing demand from the oil and gas and the construction sector.

Earnings before interest and tax (EBIT) in 2017/18 rose to 1.18 billion euros ($1.38 billion) on revenues of 12.9 billion euros.

The profit and Voestalpine’s outlook for 2018/19 were better than expected, said Morgan Stanley in a note to clients.

“Guidance would suggest an EBIT of 720 million euros in the second half (2018/19), which implies more than 20 percent year on year uplift,” Morgan Stanley analysts said.

Voestalpine’s shares traded 3.8 percent higher at 44.84 euros at 0915 GMT. (Reporting by Kirsti Knolle Editing by Amrutha Gayathri and Edmund Blair)

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