Letter of the Management Board

EUR 1,178 million. This is the sum of voestalpine Group investment in its future during the business year 2014/15 alone—its largest ever annual investment expenditure. The only exception was the year 2007/08, which marked the EUR 4.5 billion acquisition of BÖHLER-UDDEHOLM.

EUR 1,178 million of investment within twelve months, during an economic period in which Europe is still working through the huge aftermath of the financial and economic crisis following Lehman & Co. This is not only a sign of strength in an economically volatile and geopolitically uncertain environment, but also an indicator of confidence in the future, particularly for our customers, our employees, and our stakeholders.

However, in contrast to the past, this is also a clear signal that in the future our economic base will no longer be solely in Europe. Instead, today voestalpine has irrevocably departed from its traditional role as a recognized European partner to important industrial sectors that include the automotive, mechanical engineering, oil and natural gas, and railway construction industries, and is now finally on a path to becoming the leading global player in each of its segments. There is no clearer evidence of this than the shifting regional allocation of financial investments over the past ten years.

In the business year 2005/06, 81% of investment expenditure was directed to Austrian sites, with 16% going to other sites within the European Union and only 3% to the rest of the world. By 2009/10 these figures had altered only marginally, to 75% in Austria, 20% to the rest of the EU, and 5% worldwide. However, the Group’s new strategic positioning over the past five years has led to unmistakable signs of a paradigm shift: in 2014/15 only around half of investment expenditure was allocated to Austria, 20% to other EU countries, and almost 30% of the funds were already flowing to countries outside of Europe. This trend of favoring international markets will continue to grow over the coming years, especially if—when viewed against the background of increasingly restrictive European industrial policies, which, for whatever reason, are increasingly taking on the appearance of a deliberate strategy of deindustrialization—the cost situation for European production is no longer compatible with a globally competitive market position.

More European regions than ever are ceasing to be competitive in today’s global market. Excessive bureaucracy, excruciatingly protracted official approval procedures, employment laws that fail to reflect the economic realities, and demotivating tax rates are the central, but by no means sole, reasons for this development. The fact that both political decision-makers as well as the European public in general are becoming increasingly less cognizant of the importance and significance of industry as the key to our prosperity and main provider of employment should give us further food for thought. And we are not talking about industry alone: it is the long industrial value chains more than anything else, from raw material right through to end product, in all spheres of life, which ensure the secure existence of many service sectors, right through to trade and commerce. Freight forwarders and logistics companies, plant manufacturers, civil engineers, software developers, installation companies, mechatronics technicians ... how many of them will still be needed if industry leaves? Who will finance research and innovation, universities and research institutions? Who will pay the taxes needed to support the lives of children and the older generation, maintain the health and social system, and be able to afford education and infrastructure, state institutions and politicians?

Why are we in Europe not prepared to learn from the mistakes made by other countries before us, and which we have recognized, rather than insisting on repeating them ourselves? Why can’t we learn from Great Britain’s erroneous belief dating back to the 1990s that the financial and insurance industries alone could provide an adequate industrial basis, and from the USA’s mistaken conviction over the past 20 years that traditional industry could happily be abandoned in favor of the Internet, smartphones, and social media. Both countries are now making every effort to reestablish their positions in the traditional industrial sector, for reasons of stability, employment, prosperity, and to safeguard their futures.

Irrespective of which path Europe finally chooses to follow, we are actively creating the preconditions for voestalpine’s future success, covering every imaginable scenario. However, one thing is clear: we will consistently adhere to our strategy of value-adding growth based on leadership in innovation, quality, and technology. And there’s something else that won’t change either—we’ll stay one step ahead!

Linz, May 28, 2015

The Management Board