Voestalpine in accounting scandal and weak quarterly figures – Vindobona.org

The group announced that it had filed criminal charges against two former managing directors of a German subsidiary for “profit-increasing accounting errors.” At the center of the scandal is a German subsidiary of the Metal Forming Division of Voestalpine, whose name is not being disclosed due to ongoing investigations. Between the 2012/13 and 2023/24 financial years, the two ex-managers and an accountant are said to have manipulated balance sheet values, as the ORF reported. Accounts receivable and advance payments were reported too high, while production costs were not correctly accounted for. This led to an artificially inflated profit. The resulting damage is estimated at around 100 million euros.

Nevertheless, Voestalpine CEO Herbert Eibensteiner emphasized at a press conference that there had been no direct outflow of funds. The material damage to the group consisted primarily of overpaid taxes and consulting costs amounting to around EUR 2.2 million. “We discovered the incorrect postings ourselves as part of the group’s internal controlling,” explained Eibensteiner, emphasizing that this was an isolated case. After extensive investigations by auditors and lawyers, no further irregularities were found in other subsidiaries.

Former managers deny allegations

The accused former managers, who have not worked for the group since autumn 2023, deny the allegations against them through their lawyers. One of the lawyers stated that his client had always acted in accordance with Voestalpine’s internal guidelines during his employment, as reported by ORF. He announced that he would consider legal action against the company if the allegations were not withdrawn.

However, no charges will be brought against the third employee involved in the accounting scandal, an accountant who carried out the manipulations, as he had contributed to the investigation of the case. The allegation is that the ex-managers may have received excessive bonuses as a result of the falsified profits, which is now being investigated.

Criticism of communication policy

The scandal has not only legal but also communicative consequences for the company. The way Voestalpine made the incident public was sharply criticized. The false postings were only disclosed in June 2024 as part of the annual financial statements and were not actively communicated beforehand. Eibensteiner explained that at no point was there an obligation to immediately disclose the incident ad hoc, as the impact on the company was relatively minor. The Financial Market Authority (FMA) has since confirmed this assessment and found no violation of the disclosure regulations.

Nevertheless, Eibensteiner admitted afterwards that communication could have been more transparent: “We don’t need to discuss the fact that communication could have been better.” Former Voestalpine CEO and current Chairman of the Supervisory Board Wolfgang Eder was also self-critical: “Yes, communication could have been better – the Management Board will learn from this.”

Profit slump in the first quarter of 2024/25

However, Voestalpine’s financial challenges are not limited to the aftermath of the accounting scandal, as ORF reported. The company is suffering from a generally weak economic environment. In the first quarter of the 2024/25 financial year, profit after tax fell from EUR 213 million in the previous year to EUR 150 million. Sales also fell from EUR 4.4 billion to EUR 4.1 billion. The decline is mainly attributed to the weakening automotive business in Germany and a further devaluation of the German subsidiary Buderus Edelstahl.

CEO Eibensteiner nevertheless spoke of a “solid result in a difficult environment”. The devaluation of Buderus Edelstahl, which reduced the quarterly result by 28 million euros, had a particularly negative impact. The process of selling the subsidiary is in full swing and binding offers have already been received, as Eibensteiner confirmed.

Number of employees stable, but savings in Germany.

While the number of employees at Voestalpine has remained stable overall, adjustments have already been made in Germany. The group reduced the number of employees in the automotive sector by ten percent and has not ruled out further savings. Voestalpine employs around 51,400 people worldwide, of which around 1,125 work at Buderus Edelstahl.

Investments in green steel production

Despite the current challenges, the group is looking ahead and continues to invest in sustainable steel production. As part of the “Green Steel” transformation process, Voestalpine plans to build electric arc furnaces at the Linz and Donawitz sites by 2027 in order to reduce CO2 emissions. CO2 emissions are to be reduced by 30 percent by 2029, and the group is aiming for “net zero” emissions by 2050. Eibensteiner emphasized that the company is on schedule and on budget. A total of 273 million euros have been invested so far, and the power supply for the new furnaces has also been secured.

Trust in Voestalpine must be restored

Voestalpine is going through a difficult phase due to both the accounting scandal and the challenging economic environment. While the financial consequences of the scandal appear manageable, the group is faced with the task of regaining the trust of its shareholders and the public. Management has already taken steps to investigate the incident, but it will still take some time before the matter is fully clarified. At the same time, the group remains on a growth path and is focusing on innovations in the field of green steel production in order to remain competitive and future-proof in the long term.

Voestalpine

Financial Market Supervision