The performance of the Metal Engineering Division in the first half of the business year 2015/16 was characterized by stable and high demand from the railway infrastructure sector one hand and on the other, by increasingly weak demand from the energy sector, primarily as a result of the rapid decline of the oil price. Overall, however, the positive performance of the previous quarters largely continued so that the steel production capacity in Donawitz, Austria, can continue to be fully utilized.
In the Rail Technology business segment, record rail production is anticipated for the current business year due to a very good environment for railway projects, particularly due to the ambitious projects planned by European railway operators. Furthermore, overseas projects in the areas of heavy-haul railway transport and mass transit are contributing to the very satisfactory level of demand for premium rails. As a result, rail production expanded from a three-shift to a four-shift operation for the first time as of the beginning of this business year.
The Turnout Systems business segment, which has production locations worldwide, also profited from global momentum in the railway infrastructure sector. Currently, there are a number of projects for high-speed and mass transit lines being implemented, including in China. In the first six months of 2015/16, positive impulses originated from the USA and South Africa, although it can be anticipated that investments in railway freight transport in the USA will soften somewhat as a result of the decline of the transport of wheat, oil, and coal due to the economic climate. This should be at least partially compensated by the implementation of mass transit projects in the USA. Massive investments in railway infrastructure in the MENA countries, especially Saudi Arabia, also contributed to this business segment’s excellent revenue and earnings figures.
In the first half of 2015/16, the Wire Technology business segment enjoyed a solid level of demand, particularly from the automobile industry. As a result of the drop in sales of shaped wire for the oil and natural gas industries, the capacity of the wire drawing facility in Bruck an der Mur, Austria, has not been utilized as fully as in previous periods. The integration of Italian manufacturer of special wire Trafilerie Industriali S.p.A., which was acquired last year, proceeded on schedule, and the company has already made a commensurate contribution to the positive performance of this business segment.
In the past quarter, the Seamless Tubes business segment could no longer hold out against the trend toward increasing restraint in making investments, especially in the North American oil and natural gas industries. Contracts being awarded by countries in the Middle East are still at quite a good level, although the competition for these contracts has become fiercer. In contrast, the smaller segment of industrial tubes profited from the continuing positive performance of the automobile industry. As a result of declining orders from the oil and natural sector, capacity adjustments at the production site in Kindberg, Austria, were made at the beginning of the business year. As of the second quarter of the business year 2015/16, one shift was completely eliminated. However, the backlog of orders is still quite solid despite the challenging market environment so that there is sufficient work for three-shift operation in the coming months.
The Welding Technology business segment, which is also disproportionately dependent on the energy sector, has faced a very difficult market environment in the course of the current business year. Sales of welding consumables, which are used in the construction of power plants and in the energy engineering industry for line pipe projects or for oil and natural gas exploration, have been suffering from weak demand in this segment for quite some time. This lack of momentum in demand is currently being countered with a massive restructuring program.
The most important investment projects for the Metal Engineering Division are on track throughout. The most significant project as far as size is concerned, is the construction of a new and extremely technologically sophisticated wire rolling mill in Donawitz, Austria. Construction has already reached an advanced stage, and its completion, which is scheduled for the end of the business year 2015/16, is on track. Furthermore, the fall of 2016 will see installation of a new walking beam furnace for rail production; this will ensure yet another improvement in quality and optimization of throughput. Currently, investments are being made in the creation of additional capacity for the processing of turnout components due to the excellent order situation for turnout systems and continuing positive future prospects in Europe. In the current reporting period, the Metal Engineering Division invested a total of EUR 95.3 million (previous year: EUR 87.8 million).
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