The Bank of America report on major European steelmakers (ArcelorMittal, ThyssenKrupp), alongside the return to developed markets, supported the recovery of Viohalco stock back onto an upward trajectory. However, the narrowing discount between the market capitalization of the parent holding company and its subsidiaries is likely linked to the return to profitability of the steel sector (Sidenor steel), which inevitably turns Viohalco toward increased investments and the pursuit of new capital sources.
Pressures and counterweights
In its sector report, the American bank recognizes that steelmakers will face pressure from high energy costs heading into the third quarter. The recent rally in energy prices in Europe, according to BofA, is expected to weigh on margins; however, the impact on estimated sector operating costs will remain modest. Although Viohalco is not explicitly named in the report due to relative size, it will face high energy costs, but possesses the business model required to pass through the higher expenses. Bank of America expects the market to look past short-term pressures as metal prices rise, enabling producers to pass along higher costs through sales and maintain their underlying profitability trajectory. This exact price pass-through mechanism is deployed within the business models of both Cenergy Holdings and ElvalHalcor. Additionally, product demand acts as a key offsetting factor against these pressures: Cenergy boasts a high order backlog in onshore and submarine cables, while ElvalHalcor, following its 250 million euro capital increase, is boosting its productivity levels—and according to group sources, registering new records.
Sidenor: Favorable conditions
Viohalco's steel segment is moving upward, driven by domestic construction activity growth in Greece and the recovery of its Stomana unit in Bulgaria. In the first half of 2026, Sidenor generated turnover of 559 million euros and a 220% surge in pre-tax profits to 20 million euros, while adjusted operating earnings reached 50 million euros. Despite the recovery in construction activity and Sidenor's financial figures, the company has not undertaken major capital expenditures in recent years. For 2026–2027, however, as disclosed by the company, new investment projects are scheduled for spooler lines at Sovel, with planned commercial operation within the fourth quarter of 2026, and a spooler line at Stomana (Bulgaria) in 2027, alongside upgrades to the NRM rolling mill, a high-speed steel quality control line, and potential operational enhancements in the scrapyard management area and the Consteel unit. Today, European measures under the Carbon Border Adjustment Mechanism (CBAM compliance) expand margins for European enterprises and reduce price pressure from imports. Furthermore, as estimated by the company, new safeguard measures are expected to materially reduce duty-free import quotas across all product categories. With the European industrial sector recovering, Viohalco may well explore options to expand into new capital sources. Sidenor was absorbed by its parent holding company in 2013, at a time when the sector was struggling. Today, with the sector's outlook reversed, raising capital through a direct listing of shares on Euronext Athens Exchange stands as one of the viable options. Should sector investments increase, raising capital becomes virtually inevitable.
Dimitris Pafilas
dpafilas@yahoo.com
www.bankingnews.gr
Readers’ Comments