June 1, 2017 / 6:35 AM / a year ago

UPDATE 2-Voestalpine says political risks complicate outlook

* Steelmaker optimistic for first half of new business year

* Says stable Chinese economy, recovery in Europe help

* Political risks in U.S., Brazil complicate planning (Updates with CEO, details on forecast, shares)

VIENNA, June 1 (Reuters) - Voestalpine’s first-half earnings should rise strongly but political uncertainties in the United States, Europe and Brazil made it difficult to give a second-half forecast, the Austrian steelmaker said on Thursday.

Its 2017-18 financial year that began in April got off to a strong start with higher demand from various industries thanks to a stable Chinese economy, a recovery in Europe and new projects in emerging markets, the Linz-based company said.

For 2016-17, adjusted earnings before interest and tax (EBIT) rose 3.1 percent to 839.9 million euros ($944 million), beating its forecast for unchanged earnings, supported by solid car industry demand and a healthier oil and gas sector.

Voestalpine’s shares jumped as much as 2.7 percent in early trading on Thursday but were 1.8 percent lower by 0927 GMT.

Like its rivals, Voestalpine has had to deal with the fallout from sharp price falls, strong international competition and overcapacity in the sector, despite its focus on premium metal products.

Chief Executive Wolfgang Eder told reporters a new direct reduction plant in the United States and new wire production in Austria should help keep its core earnings (EBITDA) margin stable at 13.6 percent this financial year.

But several political risks made it difficult to form a clear picture going forward. Eder said it was unclear when U.S. tax reductions and new infrastructure projects would come in, or what impact they might have.

U.S. President Donald Trump pledged during his election campaign last year to introduce an extensive infrastructure package as well as substantial tax reductions.

“We don’t know how matters stand and how political decisions might affect the economy,” Eder said, adding that the company had to be prepared for import restrictions in the United States.

Other political challenges which could influence its business included uncertainty in Brazil, Voestalpine’s biggest South American market, and the European Union’s relationship with Russia, Eder said.

Voestalpine’s steel division, which makes high-quality steel strips and other materials primarily for the automotive industry, reported a 20 percent increase in EBIT.

While demand for railway infrastructure projects weakened into the beginning of 2017, business with the oil and gas industry strengthened over that period, the company said.

It proposed to increase its dividend to 1.10 euros per share from the previous year’s 1.05 euros. ($1 = 0.8898 euros) (Reporting by Kirsti Knolle; editing by Francois Murphy and David Clarke)

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