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After four and a half years of financial and economic crisis, 2013 was supposed to finally bring a turn for the better in many parts of the world. At least this was the expectation of the majority of the experts, whether they were in renowned economic think tanks or in the political mainstream in the major economic regions. The belief was that the Chinese economy would stabilize after the formation of the new government, that the fiscal cliff problem in the USA was being overstated, and that the European Union would get the sovereign debt crisis in its Southern member states increasingly under control.

Confronted with day-to-day reality that looked quite a bit different, many companies had doubts even then that these optimistic expectations would be fulfilled. Simply said, the facts showed a different picture. Rather, they pointed to a continuation of the stagnating, even recessive, trend in Europe, at best a bumpy recovery in the USA, and continuing economic uncertainties in China. India is lingering in a state of bureaucratic lethargy and the result of Japan flooding its economy with money is completely uncertain; of the major economies, only Brazil is showing a real trend toward recovery.

From today’s vantage point, one can say that, unfortunately, global economic reality in early summer of 2013 corresponds precisely to these critical expectations and has very little in common with the repeatedly expressed confidence in the early part of the year. In the meantime, the economic forecast for the year has been revised downward across the board—and that not just once.

Against this backdrop, it appears less and less probable that the hoped for economic recovery will actually occur in the course of this year. It is increasingly unrealistic to hope for more than a temporary pickup of demand resulting from inventory cycle effects in individual industry segments.

In any case, indications for the next several months from the most important customer industries point largely to a continuing cautious trend as far as demand is concerned. Due to the budget restrictions in the public sector, only very modest growth rates—if there is any growth at all—can be expected in Europe for years to come in the construction and construction supply industries; in the short term, even a continuing recessive trend, especially in Southern Europe must be anticipated. In the USA, the picture is better, however, the improvement is not broad-based enough that it can be considered a far-reaching trend reversal in the construction sector. Even in China, the economic stimulus programs initiated by the new government have not brought the anticipated sweeping success; furthermore, in comparison to past years, the country’s economic momentum is being significantly slowed by its accelerated transformation from a state-run economy to one that is driven primarily by consumption.

In the automobile industry, demand in non-European markets is for the most part still satisfactory, however, automobile production in Europe will continue to face a declining trend in the medium term. The main reasons are increased relocation of production facilities to growth markets by a number of manufacturers on one hand and, on the other, more restrained buying habits by European consumers due to the crisis.

In the energy sector, the uptick in new projects in the oil and natural gas production segments, which was anticipated for 2013, has not occurred; therefore, expectations are now focused on the second half of the year. Apart from China, there is no uptrend in sight in the second half of the year for the other conventional energy generation segments. The same applies to alternative energies, where the cutbacks of subsidies in many countries are making investments increasingly unprofitable.

The consumer goods, white goods, and electrical industries should generally see a comparatively solid level of demand in 2013. The same applies to the mechanical engineering segment as well as the construction and agricultural machinery market, although China has been significantly weaker in some segments, particularly construction machinery, than in recent years.

The aviation industry and the overseas railway sector continue to enjoy a high level of demand.

All in all, the overall economic picture toward the end of the first half of 2013 indicates that, while the downtrend that dominated the second half of 2012 has stopped, the anticipated trend reversal has not—at least not yet—occurred and there are no real signs that it will occur in the next months.

Against this background, the following development appears likely for the voestalpine Group in the first half of the new business year:

  • Steel Division
    Full capacity utilization, albeit continuing price pressure in Europe due to continuing weak demand, and volatile raw materials prices that are trending downward.
  • Special Steel Division
    With the exception of seasonal fluctuations, practically full capacity utilization with a price level that is mostly stable both for sales and procurement.
  • Metal Engineering Division
    Full capacity utilization with a steady level of demand and stable or slightly declining (yet still satisfactory) prices at a solid level.
  • Metal Forming Division
    Almost full capacity utilization, however, prices continue to be subdued due to lagging demand; additional challenges due to the start-up phase of new, international production sites.

From today’s perspective, there is little change to be expected in the second half of the business year, as the incentives necessary for a more positive trend at the global level are absent—an assessment that is confirmed by the revision of growth expectations in all current economic forecasts.

Despite this economic environment that continues to be challenging, the voestalpine Group—due to its specific competitive position as a quality and technology leader in the high-end steel production sector—should be able to maintain the earnings leadership it has held in recent years in the business year 2013/14 as well.

The accelerated transformation from a steel corporation to a technology and capital goods group enables voestalpine to maintain  far greater stability with regard to earnings compared to industry competitors, thus increasing its predictability for the capital markets.

Against the backdrop of continuing global uncertainty about future economic development, from today’s vantage point, for the business year 2013/14, an operating result (EBITDA) and profit from operations (EBIT) at about the same level as the past business year can be anticipated.

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  • Share price, end of period (euros) 23.96    EPS – Earnings/share (euros) 2.61    Dividend/share (euros) 0.90
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