Bekaert SA (BEKSF): A Hidden Gem in the Steel Reinforcement Sector, Poised for a Turnaround

Amid a global economic slowdown marked by tariff wars, overcapacity, and weak demand, Bekaert SA (BEKSF) has demonstrated an enviable ability to protect its margins while positioning itself at the forefront of the green energy revolution. The Belgian materials giant’s Q1 2025 results, though showing a 3% revenue decline, underscore its resilience in a challenging environment. With a robust balance sheet, a 6.19% dividend yield, and strategic bets on hydrogen technology and Asia-Pacific growth, Bekaert is primed to capitalize on cyclical recovery and structural shifts in energy markets. Here’s why investors should act now.

Margin Resilience Amid Revenue Headwinds

Bekaert’s Q1 2025 sales dipped to €991 million, reflecting softer demand in Europe and North America, particularly in construction and industrial sectors. Yet the company’s underlying EBITDA margins remain intact, thanks to disciplined cost management and a global supply chain designed to mitigate tariff risks.

The decline was driven by falling volumes (-1%), price-mix effects (-1%), and lower input costs passed to customers (-2%). However, Bekaert’s localized production strategy—70% of U.S. sales now sourced domestically—has insulated it from tariff volatility. Meanwhile, operational improvements, such as 95% plant utilization in China’s rubber reinforcement segment, have bolstered profitability.

The company’s full-year guidance for stable EBITDA margins relative to .2024** is no accident. Management has slashed central overhead costs, optimized working capital, and prioritized high-margin specialty segments like semiconductor-grade ultra-fine wires. These actions, combined with a 65% reduction in reliance on imported raw materials, ensure margins stay resilient even as revenue fluctuates.

Dividend and Buyback: A Vote of Confidence

Bekaert’s financial discipline is evident in its €200 million share buyback program, of which €50 million has already been executed. More compelling is its proposed dividend of €1.90 per share, yielding a generous 6.19% at current prices, a rare find in a market where yields are dwindling.

This dividend payout signals management’s confidence in cash flow stability, supported by robust free cash flow margins of 15% in recent years. The combination of buybacks and dividends reflects a shareholder-friendly approach, rewarding investors while reducing equity dilution in a down cycle.

Growth Drivers: Hydrogen Tech and Asia-Pacific Dominance

Bekaert’s most exciting growth catalyst is its pivot to green hydrogen infrastructure. Its newly launched Hydrogen Innovation Hub in Belgium is a game-changer, focusing on next-gen electrolyzer components like porous transport layers (PTLs) and anion exchange membranes (AEMs). Collaborations with EU partners through the HYScale project have already produced a 100kW AEM electrolyzer prototype, targeting a CAPEX of €400/kW—a critical milestone for cost-effective green hydrogen production.

This shift into high-margin, low-carbon technologies isn’t just visionary; it’s a necessity. The EU’s 2030 climate targets and global decarbonization efforts will create a $1.3 trillion hydrogen market by 2030, per BloombergNEF. Bekaert’s early leadership here positions it to capture first-mover advantages.

Meanwhile, Asia-Pacific markets remain a growth engine. China’s automotive sector drove a 10% volume surge in rubber reinforcement, while India and the Middle East bolstered specialty businesses. Even in its struggling U.S. Sustainable Construction unit, delays are temporary—projects are on hold, not canceled.

Near-Term Challenges: Temporary, Not Structural

Bekaert isn’t immune to cyclical headwinds. Overcapacity in the tire industry, tariff-driven order delays, and weak construction demand are weighing on near-term results. However, these are not existential threats.

The company’s diversified end markets—spanning automotive, energy, and industrial sectors—limit exposure to any single downturn. Its “local-for-local” production model shields it from trade wars, and cost controls ensure margins stay intact even as sales stagnate.

Undervalued at 8.34x P/E—A Buying Opportunity

At a P/E of just 8.34x, Bekaert trades at a discount to its historical average and peers in the industrial materials sector. This valuation ignores its hydrogen tech pipeline, Asia-Pacific growth, and dividend resilience. A recovery in global demand—whether from infrastructure spending, green energy projects, or normalization of trade policies—could unlock significant upside.

Conclusion: Buy Now—A Rare Blend of Safety and Growth

Bekaert is a paradox: a cyclical company trading at a defensive valuation, yet sitting on secular growth drivers. Its margin resilience, shareholder-friendly policies, and strategic bets on hydrogen and Asia-Pacific markets make it a compelling buy at current levels. With a dividend yield of 6.19%, a P/E of 8.34x, and a balance sheet capable of weathering near-term storms, Bekaert offers both income and capital appreciation potential.

Action to Take: Accumulate Bekaert (BEKSF) now before the market recognizes its true value.