Adoption of the long-term Group Strategy
Ever since its IPO in 1995, but especially since the strategic realignment in the business year 2001/02, the voestalpine Group has consistently followed the path of value-added growth. With this strategy that is oriented not toward revenue or volume but exclusively toward “high tech/high quality,” the Group has established a leading position in Europe in its core segments both with respect to profitability and quality and technology. Furthermore, it is world market leader in some significant business segments.
Against the background of this global macroeconomic environment that is constantly changing with ever increasing speed, it is our intention to not only secure this claim in the long term but to expand it.
Therefore, after intensive and detailed discussions with the Management Board over the course of twelve months, in December 2012, the Supervisory Board of voestalpine AG approved the central elements of our Group Strategy 2020, which comprises the following propositions and objectives:
- The voestalpine Group is consistently forging ahead with its long-term path of value-added growth.
- Growth will be focused on the mobility and energy industries and geographically, primarily on the growth markets outside of Europe. In Europe, the consolidation of market, quality, and technology leadership in the core business segments will be the main target.
- The continued expansion of processing operations, which are already dominating current activities, will be pursued systematically; thus, the transformation from a steel company to a technology and capital goods group will be driven forward consistently.
- In the technologically most sophisticated market and product segments of mobility and energy, the Group is aiming for a leading position worldwide.
- Concurrently, the Group is striving to sustainably consolidate its earnings leadership.
Provided that the global economic environment will stabilize in the medium term, the target revenue for the business year 2020/21 is EUR 20 billion, with EBITDA and EBIT margins of 14% and 9% respectively and a return on capital employed (ROCE) of 15% as long-term, average figures.
In order to realize these quantitative objectives, the long-term direction must be primarily focused on the consistent expansion of leadership role as a provider of top-quality products in the Group’s core business segments.
- Since our IPO in 1995, the revenue generated outside of Europe has been continually expanded from a mere 6% to currently 23%. Over the long term, the objective is to achieve a balanced revenue ratio between Europe and the rest of the world. For the business year 2020/21, the goal is that 40% of revenue will be generated in non-European markets. Europe continues to be the point of origin for innovations, but—as opposed to Asia and the Americas—it will no longer be a primary driver of growth.
- Since 1995, the share of the Group’s key growth sectors mobility (automotive, railway, aviation) and energy has risen from 32% of the Group’s revenue to currently 60%. By 2020/21, these two sectors should be generating around 70% of the Group’s revenue.
- The development of the “classic,” cyclical steel operations versus the comparatively more stable processing activities has been similarly significant in the past years. Since 2001/02, the steel segment’s share of the Group’s revenue has been reduced from 55% to 29%; by 2020/21, it should decline even further to around 25%. While completely phasing out steel production has been part of our strategy discussion, this possibility was rejected, as eliminating the voestalpine’s own high-quality steelmaking capabilities would result in a massive weakening of the downstream segments that build on an own materials expertise.
Even though ongoing changes are impacting the the global environment—and will continue to do so—as the Group Strategy 2020 is implemented, the voestalpine Group will remain an innovative and reliable partner for its customers, its employees, and its shareholders.
Closure of TSTG Schienen Technik GmbH & Co KG
After the decision by the Management Board in March 2012 to close the rail production of TSTG Schienen Technik GmbH & Co KG in Duisburg, the subsequent negotiations with the Works Council regarding a reconciliation of interests and a social compensation plan for the remaining roughly 350 employees were successfully concluded on May 16, 2013. The final closure will take place toward the end of the 2013 calendar year after all still remaining orders have been completed (regarding provisions formed for the closure, please see the section “Antitrust proceedings relative to railway superstructure material.”).
Streamlining of the Group’s structure
In the early part of the business year 2012/13, the previously independent Profilform and Automotive Divisions were merged to jointly form the Metal Forming Division. Now, for the first time, all of the Group’s competencies have been incorporated into four large divisions that are approximately the same size.
After the first year, the new division can boast quite positive results. Sustained by orders from renowned companies, the extensive steps toward globalization taken by the Tubes & Sections and Automotive Body Parts business units are fully on track, both time-wise and as far as costs are concerned. Due to its stronger global presence inherited from the two former divisions, the new division can expand its market position more efficiently and in a more goal-oriented manner. It is currently investing a total of around EUR 120 million in the establishment and/or expansion of production locations in Germany, Romania, the USA, China, South Africa, and Brazil.
Antitrust proceedings relative to railway superstructure material
In the antitrust proceedings relative to railway superstructure material, in early July, the German Federal Cartel Office (Bundeskartellamt) imposed fines totaling EUR 124.5 million on four manufacturers and suppliers of rails for having entered into anti-competitive agreements to the detriment of Deutsche Bahn AG. EUR 8.5 million of these fines were levied against companies belonging to the voestalpine Group. This means that the German Federal Cartel Office has thus confirmed voestalpine’s status of cooperating witness for the major part of the proceedings and the comparatively small fine concerns marginal segments only. Therefore, the antitrust proceedings involving for the most part Deutsche Bahn have now been resolved. At a later date, the German Federal Cartel Office will examine the deliveries of railway superstructure material to regional and local customers. From today’s perspective, it is still too early to estimate when we can count on a final decision regarding these additional issues.
After very intensive negotiations with Deutsche Bahn, in late April 2013, we succeeded in reaching an agreement with regard to payment of compensation for damages for direct deliveries made within the scope of the rail cartel; it was agreed to keep the details regarding the actual amount confidential. This means that the first—and large—portion of the antitrust proceedings has now been concluded for voestalpine AG. Furthermore, this should enable us to restore the foundation for a continuing long-term, stable collaboration with Deutsche Bahn.
The provisions created for the antitrust proceedings and associated actions and costs as well as for the closure of TSTG Schienentechnik GmbH & Co KG in the annual financial statements 2011/12 in the amount of EUR 205.0 million were adjusted downward to EUR 204.4 million in accordance with the current estimate and are considered to be appropriate.