The “Outlook” section of the letter to shareholders for the first quarter of 2013/14 contains the following assessment that summarizes the company’s outlook up to the end of the calendar year: “The performance of the voestalpine Group up to the end of 2013 is expected to be stable overall, with the exception of some moderate seasonal effects.”
The reality of the past months confirmed this assessment very precisely. The economic trend over the summer was indeed largely stable, albeit still at only a modest level in a number of industrial segments. The Group’s slightly weaker performance with regard to revenue and profit compared to the first quarter of the business year is the result of seasonal effects (and a non-recurring effect totaling EUR 10 million in the Steel Division).
Current expectations for the rest of 2013 and for early 2014 are not expected to differ significantly from earlier expectations: a continuation of the development of recent months with—viewed positively—continuing stabilization at a moderate level. Not only has the broad upward trend needed for a substantial economic recovery not established itself, but the needed momentum is not strong enough.
Exports will remain the driving force of the automobile industry in Europe as a revival of demand within the EU in the short term is not expected because consumers are still demonstrating cautious buying patterns due to lingering doubts regarding an economic recovery. Uncertainty with regard to scope and speed of the paradigm shift with regard to energy, but also as far as the oil price is concerned, has been slowing down investment activity in the energy sector for the past year and a half—not only in Europe. The third major industrial sector that determines economic prosperity, the construction sector, is not expected to contribute to an economic recovery in any meaningful way—at least in Europe—although some regions may see a slight revival in 2014.
The economic momentum that is still in short supply in the major industrial sectors (automotive, energy, and construction) cannot be fully compensated by the significantly better trend in a number of niche segments, such as the white goods and consumer goods industries, the construction machinery and agricultural machinery segments, railway infrastructure, the aviation industry and—to some degree—the general mechanical engineering industry. Nevertheless, the prospects of growing global economic momentum in the course of 2014 seem to be sound, especially considering the noticeable successes of restructuring measures with regard to budget management in a number of European countries, the stabilization of growth in China at just above 7%, and a marked economic upswing in North America. In recent months, another element of uncertainty has been introduced by the difficult—and becoming more so—dynamics between the exchange rates of the major global currencies and the unexpectedly low inflation in some regions.
The development of the voestalpine Group should continue at a stable level during the second half of the business year 2013/14.
This means the following expectations for the individual divisions:
- Steel Division: solidly full capacity utilization, however, at price levels that continue to be subdued
- Special Steel Division: almost full capacity utilization at slightly more volatile prices
- Metal Engineering Division: stable, full capacity utilization at steady prices
- Metal Forming Division: largely full capacity utilization at reliably consistent prices
Against this backdrop and the overall economy that is anticipated to improve in the first months of the 2014 calendar year, the results for the second half of the business year should be slightly higher than those for the first six months. From today’s vantage point, it can be expected that the results (EBITDA, EBIT) generated by the voestalpine Group in the business year 2013/14 will be at about the same level as the previous year’s figures.