Bekaert's Resilience in a Turbulent Market: A Strategic Deep Dive into Margin Stability and Shareholder Value Creation

In an era of escalating trade tensions, volatile currencies, and slowing demand, Bekaert stands out as a rare industrial player that combines operational discipline with forward-looking innovation. The company's 2025 half-year results underscore its ability to navigate headwinds while maintaining robust cash flow and margin resilience—a testament to its strategic rigor and execution. For investors seeking long-term value in the industrial materials sector, Bekaert's playbook offers a compelling case study.

Margin Resilience Amid Adverse Conditions

Bekaert's financial performance in H1 2025 demonstrates its mastery of cost control and pricing discipline. Despite a 5.2% decline in consolidated sales to €1.9 billion, driven by volume reductions and FX headwinds, the company achieved an EBITu1 margin of 8.8%, down only 110 basis points from 9.9% in H1 2024. This margin stability is remarkable given the context:
- Volume declines: -2.6% in sales due to weaker demand in key markets.
- Tariff pressures: U.S. steel tariffs surged to 50%, complicating cost pass-through.
- Currency impacts: A strong dollar and renminbi eroded euro-denominated earnings.

Bekaert's response? Aggressive cost rationalization and working capital optimization. Overhead costs were reduced by €21 million in the first half alone, and the company slashed €135 million in working capital year-on-year. These measures fueled a Free Cash Flow of €123 million, a 186% increase from H1 2024. Such discipline has kept the net debt-to-EBITDAu2 ratio at a healthy 0.67x, even as the group returned €74 million to shareholders via a €200 million share buyback program.

Strategic Adaptability: Tariffs, FX, and Market Shifts

Bekaert's resilience stems from its ability to adapt its global footprint to local conditions. For example, it leverages local sourcing and production to mitigate tariff impacts, particularly in the U.S. and China. The company has also been proactive in passing on cost increases to customers, though rising trade tensions have slowed this process. In H1 2025, it managed to offset 70% of tariff costs, a rate higher than many peers.

Currency volatility, meanwhile, has been tempered by hedging strategies and a focus on pricing in local currencies. While the dollar and renminbi weakened against the euro, Bekaert's non-consolidated Brazilian joint ventures (sales up 10% year-on-year) provided a buffer, generating €24 million in net results.

Innovation as a Long-Term Catalyst

Beyond short-term resilience, Bekaert's long-term appeal lies in its commitment to industrial material science innovation. The company's R&D investments are squarely focused on sustainability and performance, with tangible outcomes already materializing:
- Mega Tensile: This tire reinforcement technology reduces steel usage by 20% and CO₂ emissions by 15–20% per tire. Recognized with the Material Innovation Award at Tire Tech Expo 2025, it positions Bekaert as a leader in sustainable mobility.
- Bezinox® stainless steel wire: Used in subsea HVAC cables, it offers corrosion resistance and lower energy losses, aligning with the global push for green energy infrastructure.
- High-strength flat carbon steel armor wire: Enabling longer, thinner deep-sea power cables, this innovation is critical for offshore wind and HVDC projects like the Great Sea Interconnector.

These advancements are not isolated experiments but part of a broader strategy to align with global energy transition goals. Bekaert's partnerships with tire giants like Goodyear and energy infrastructure players further validate its market relevance.

Investment Case: Balancing Prudence and Growth

Bekaert's current valuation reflects its dual strengths: a stable cash flow generator with a forward-looking innovation engine. At a trailing EBITDAu2 multiple of 9x, the stock appears undervalued relative to peers in industrial materials. Its €123 million Free Cash Flow in H1 2025, combined with a disciplined capital allocation strategy (capex down 20% year-on-date), suggests strong capital efficiency.

For the full year, Bekaert expects EBIT margins of 8.0–8.5%, slightly below 2024 levels but underpinned by structural cost savings. While near-term demand in Europe and the U.S. remains uncertain, the company's exposure to high-growth sectors—such as hydrogen infrastructure and sustainable construction—offers long-term upside.

Conclusion: A Blue-Print for Industrial Resilience

Bekaert's ability to balance cost discipline with strategic innovation makes it a standout in a sector often plagued by margin fragility. As global markets grapple with trade wars, currency swings, and decarbonization pressures, companies that can adapt their operations and portfolios while investing in tomorrow's technologies will outperform. Bekaert's half-year results and long-term roadmap suggest it is well-positioned to do just that. For investors with a 5–10 year horizon, the company represents a compelling blend of defensive strength and growth potential.

Investment Recommendation: Buy, with a target price based on a 10x 2025 EBITDAu2 forecast.