While the reality of 2013 was significantly weaker than even world-famous experts anticipated at the beginning of the year, for the first time since “the crisis,” 2014 is expected to see not only a continued consolidation in those regions that are most important for the global economy, but increasing momentum in economic growth. The main reasons for this heightened optimism are progress in Europe in the economic restructuring of the nations in Southern Europe and, to a lesser degree, Central Europe as well, a sound upwards trend in economic growth in North America, stabilization of Chinese economic growth at a level of around 7% annually, and the possibility that, after the recent parliamentary elections, India will again return to a trajectory of growth, at least in the medium term. Growth prospects in Brazil and Russia, however, are expected to remain limited, at least in the short term. As far as Russia is concerned, uncertainty as to possible additional sanctions is another factor that can impact its prospects. The fact that the global economic forecasts—in contrast to the previous year—have been revised upward numerous times in recent months also points to growing optimism with regard to the development of the global economy.
Despite this improved economic environment, it would be premature to speak of a broad-based global trend reversal. However, it might be possible to create those prerequisites in 2014 to enable a more significant upward trend of the global economy than has been the case in recent years.
Indications of future demand from the most important customer industries point to a development that ranges from stable to moderately positive for the year. For example, signals from the construction and construction supply industries in Europe are conveying the prospect of recovery for the first time in years. In the USA, this area is significantly stronger than in recent years and while China is not showing additional growth, this sector is stable at a solid level.
While the overseas automobile industry reported increasing sales in the past year, the European automotive sector has joined this upward trend in recent months, increasingly across the entire range from high-end cars to sub-compacts.
As was the case in 2013, the energy sector is expected to remain the weakest of the major industrial sectors in 2014 as well. Apart from a largely stable development in the oil and natural gas exploration sectors, the energy transport segment (oil and natural gas pipelines) is expecting only a slight recovery in the form of execution of individual projects, some of which had been postponed multiple times. A more broad-based revival in this sector seems unlikely in 2014 as well. The same applies to the conventional energy generation segment, where—with the exception of China—a noticeable uptrend does not appear to be forthcoming from today’s perspective. The main reason for this critical development is, on one hand, continuing uncertainty about the form and impact of the energy transition (particularly in Europe) and, on the other, the weak financing capabilities of individual economies with a high demand for oil and gas. In contrast, the alternative energy sector continues to enjoy a positive development, however, the cutbacks in subsidies in many countries are increasingly impacting investment activity.
The consumer goods, white goods, and electrical industries are not expecting major changes and are anticipating a solid level of demand in 2014 as well. The agricultural machinery sector continues to experience good economic conditions and the mechanical engineering sector has seen an increase in demand in recent months.
The aviation industry and the overseas railway sector continue to enjoy a high level of demand.
Against this backdrop, the following development appears likely for the voestalpine Group in the business year 2014/15:
- Steel Division
Full capacity utilization, albeit continuing price pressure in Europe due to continuing overcapacities and 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 prices in some business segments, albeit at a solid level.
- Metal Forming Division
Almost full capacity utilization with a mostly positive level of demand; new, international production sites create opportunities for additional revenue and earnings after initial challenges have been overcome.
Due to its special strategic position as a quality and technology leader in the production of high-end steel products, combined with its program to optimize efficiency, costs, and earnings to the tune of EUR 900 million over the next three years, the voestalpine Group anticipates maintaining its earnings leadership in 2014/15 as well.
Against the background of an economic environment that is stabilizing, the Group is anticipating an operating result (EBITDA) and profit from operations (EBIT) in the business year 2014/15 that will be somewhat above the past business year’s level.