Ultimately, the business year 2017/18 ended exactly the way it was forecast in the section of the annual report 2016/17, specifically, the Group’s substantially positive performance in terms of both revenue and results. But the fact that, in the end, all the revenue and results figures for the previous years—including those of the “pre-Lehman era”—were surpassed could not be foreseen a year ago.
Even though the point of departure for 2018/19 looks promising against this backdrop, the geopolitical events in the spring of 2018 underscore yet again that the deck of cards is always reshuffled every business year—and the relevant indicators do contain certain contradictions. Economic growth that has been stable across just about all major industries and countries for the first time in a decade is contrasted by the growth of uncertainty that arises from increasingly protectionist economic policies in ever more regions.
What surprises, however—and not just for the first time—is the global economy’s high resilience overall to critical political developments compared with previous years. Neither the blatant attempt on the part of the United States to control economic flows in its sense, nor the permanently growing political and military escalation in the Middle East or the increasingly escalating sanctions carousel between Russia and the West seem to undermine the broad current of economic growth. As before, particularly China and Europe but (with limitations) the United States as well are driving an ongoing upward momentum that is supported by heretofore unknown growth rates in India and new economic traction in Brazil. Nevertheless, the question remains, how long these developments will be sustained by the trust of the capital and financial markets and the willingness of investors to continue funneling funds into these markets.
At the start of the Group’s new business year, potential political risks still do not seem to have any palpable effect on at least the fundamentals of the global economy. Demand remains positive in almost all sectors of the economy and customer segments. Many industrial sectors are experiencing strong, worldwide momentum that continues unabated, and this is not expected to change in the coming months because orders on hand are high. This applies, in particular, to the automotive industry, the consumer goods industry, the aircraft construction sector as well as large portions of the mechanical engineering sector; the construction industry is seeing a gradual recovery, not just in Europe. The same goes for the oil and natural gas sector. By contrast, developments in the railway infrastructure segment (especially in the European Union) remain restrained, and demand in the conventional energy generation sector (power plant construction) remains low.
The availability of the primary raw materials used in steel production (iron ore, metallurgical coal, scrap, alloys) should not pose a problem in the new business year despite the booming economy. Judging from developments in the first few months, we may expect prices to trend toward lower short-term volatility than in the previous year, not least due to growing capacities in the mining sector.
In sum, the excellent economic environment in the first quarter of the business year 2018/19 gives us reason to expect that the strong development of key markets will continue unabated at minimum until the fall of 2018. But one must take into account with respect to the earnings performance of voestalpine AG that the results for 2018/19—particularly those of the second quarter—will be massively affected by the long-planned repairs and resulting downtime of the Group’s largest blast furnace. Excluding this non-recurring effect, the operating result for the first six months of the current business year should more or less equal that for the first half of the business year 2017/18.
It is much more difficult, however, to provide a forecast for the second half of the business year 2018/19, because material adverse effects from the trade policies of at least some countries will likely make themselves felt by this time. Moreover, the question as to the sustainability of the current economic boom, whose roots reach back to 2016, will also crop up by then.
The uncertainties in the second half of the business year 2018/19 notwithstanding, both EBITDA and EBIT for the year on the whole should correspond more or less to the previous year’s level. This is based on the assumption that the negative effects of the blast furnace repairs can be offset largely by positive effects from the recovery of individual sectors (railway infrastructure, oil and natural gas sector) and that the fallout from international trade policies will be limited. The successful ramp up of major facilities in the past 12 months (wire rolling mill in Austria; automotive components plants in the United States, Mexico, and China; HBI-plant in the US; etc.) should have a stabilizing effect on the results as well.
Linz, May 25, 2018
The Management Board
This report is a translation of the original report in German, which is solely valid.