Metal Forming Division*

Market environment and business development

In the first half of the business year 2016/17, the performance of the Metal Forming Division was marked by a continuing outstanding market trend in the Automotive Components business segment. Furthermore, the Precision Strip business segment also maintained its solid development, while the Tubes and Sections and Warehouse and Rack Solutions business segments faced weaker demand.

In the Automotive Components business segment, the uptick in incoming orders continued in the first six months of the business year 2016/17. As a result of the constantly rising car sales numbers, which are bolstered by low interest rates and the cheap oil price, among other factors, this business segment experienced a very positive development, to which both the core market of Europe and North America and China, which are becoming increasingly important, contributed equally.

The Tubes and Sections business segment on the other hand was marked by a relatively subdued market momentum. Not least due to consolidations in the supply chain, there were temporary changes in customer call-offs. Against this backdrop, sentiment in the important agricultural and construction machinery industries remained subdued both in North America and in Europe, while in China the level of incoming orders improved noticeably. After its dramatic economic crisis that has lasted a number of years, an air of cautious optimism is emerging in Brazil; combined with consistent cost reduction measures, this is resulting in a stabilization of the economic development. In Europe, the construction industry, in particular, continues to be sluggish with the exception of Great Britain, where even after the Brexit vote, there is strong demand for voestalpine products and system solutions.

The Precision Strip business segment was able to carry over the economic tailwind from the previous business year into the current year and has maintained its solid performance at a high level. This is the result of improved market conditions in Europe on one hand and a continuing positive development in North America on the other; however, this is also due to the successful integration of a new voestalpine location in Pleasant Prairie, Wisconsin, USA.

After enjoying an excellent market environment in recent years, the development in the Warehouse and Rack Solutions business segment in the first half of 2016/17 was still affected by a high level of unfulfilled orders from the past. As far as future development is concerned, incoming contracts have currently slowed somewhat, although the project landscape overall remains promising.

In the first half of 2016/17, the Metal Forming Division consistently continued its strategy of global rollouts of key technologies in the automotive sector, for example, the production of laser-welded blanks, passive safety components, and hot-formed parts and components. In Linz, Austria, plant 2 of voestalpine Automotive Components Linz GmbH was opened, creating the largest production facility worldwide for laser-welded blanks made from ultra-high-strength steel. The automotive component plant in Cartersville, Georgia, USA, is currently already moving into its third phase of expansion. Hot-forming technology will continue to be rolled out and will be supplemented by a number of additional presses and assembly facilities. Moreover, a new automotive production location is currently being built in in Birmingham, Alabama, USA, which will have several automated assembly lines. Start of production is planned for September 2017.

The acquisition of the Canadian Summo Corporation in July 2016 is another contribution to the successful implementation of the division’s growth and internationalization strategy. The company is headquartered in Burlington, Ontario, Canada, and has another production site in Monterrey, Mexico. This acquisition not only increases the division’s market share in North America but expands the product portfolio in the segment of high quality passive automotive safety components, such as airbag components and seatbelt and seat systems.

In addition to the global rollout of current key technologies, the development of future-oriented technologies presents a constant challenge. In this regard, a particular highlight is the start-up of operations of the first facility worldwide for the product innovation “phs-directform^®” in Schwäbisch Gmünd, Germany, in the second quarter of the business year. For the first time, this plant will manufacture press hardened, ultra high-strength, and corrosion-resistant automotive body parts from galvanized steel strip in a single process step (direct process). In the first half of the business year 2016/17, the Metal Forming Division invested EUR 106.5 million (previous year: EUR 78.4 million).

Financial key performance indicators

The revenue generated by the Metal Forming Division in the first two quarters of the business year 2016/17 rose in a comparison to the first half of 2015/16 by 7.4%, going from EUR 1,106.4 million to EUR 1,188.0 million. This improvement is due on one hand to the continuing positive performance of the automobile industry and on the other, to the consistent internationalization activities undertaken by the division. This positive trend was reflected in the earnings; both the operating result (EBITDA) and profit from operations (EBIT) increased substantially in a year-to-year comparison. EBITDA improved by 10.9%, from EUR 138.3 million to EUR 153.4 million but was surpassed by EBIT, which rose by 12.9%, going from EUR 91.5 million to EUR 103.3 million. As a result of the above average increase in earnings in comparison to revenue, the positive development of the margins continued, with the EBITDA margin improving from 12.5% to 12.9% and the EBIT margin going up from 8.3% to 8.7%.

A direct comparison of the first and second quarter of the business year 2016/17 shows a slight decline in revenue, due partly to a slowing in the Warehouse and Rack Solutions business segment, but mostly the result of weaker demand in the summer months because of seasonal fluctuations. Overall, revenue decreased in a direct quarter-to-quarter comparison by 7.1% from EUR 615.8 million to EUR 572.2 million. This effect is also reflected in the operating result (EBITDA) and in profit from operations (EBIT). EBITDA went down by 8.3%, from EUR 80.0 million to EUR 73.4 million, and EBIT declined by 12.9%, from EUR 55.2 million to EUR 48.1 million. This meant a decrease in the EBIT margin from 9.0% in the first quarter to 8.4% in the second quarter, while the EBITDA margin changed only slightly from 13.0% to 12.8%.

As of September 30, 2016, the Metal Forming Division had 10,724 employees (FTE), an increase of 4.0% compared to the reporting date in the previous business year (10,314). This rise is due to the expansion of automotive activities at international locations as a result of the positive economic environment in this sector as well as the most recent acquisitions. In comparison to the headcount at the end of the business year 2015/16 (10,470), this equals an increase of 2.4%.