17. Equity

Share capital (incl. disclosures in accordance with Section 241 Austrian Commercial Code (Unternehmensgesetzbuch – UGB))

As of March 31, 2019, the share capital is EUR 324,391,840.99 (March 31, 2018: EUR 320,394,836.99) and is divided into 178,549,163 (March 31, 2018: 176,349,163) no-par value bearer shares. All shares are fully paid in.

Under Article 4 (2a) of the Articles of Incorporation, the Management Board of voestalpine AG is authorized until June 30, 2019, to increase the company’s share capital with the approval of the Supervisory Board by up to EUR 125,323,693.90 by issuing up to 68,979,665 shares (= 40%) in return for cash contributions—if necessary in several tranches (Authorized Capital 2014/I). The Management Board has not exercised this authorization up until now.

Under Article 4 (2b) of the Articles of Incorporation, the Management Board of voestalpine AG is authorized until June 30, 2019, to increase the company’s share capital by up to EUR 31,330,923.02 with the approval of the Supervisory Board by issuing up to 17,244,916 shares (= 10%) in return for contributions in kind and/or in cash for the purpose of issuing shares to employees, executives, and members of the Management Board of the company or an affiliated company—if necessary in several tranches—as well as to exclude the shareholders’ subscription right (i) if the capital increase is made in return for contributions in kind, i.e. if that shares are issued for the purpose of acquiring companies, operations, or partial operations, or if shares are issued for one or more companies located in Austria or abroad; or (ii) if the capital increase is carried out for the purpose of issuing shares to employees, executives, and members of the management board of the company or an affiliated company in the context of an employee stock ownership plan (Authorized Capital 2014/II). The Management Board of voestalpine AG has utilized this authorization for the purpose of issuing shares to employees and executives of the company and of affiliated companies under the existent employee shareholding scheme three times:

• Resolution dated March 9, 2015: Increase of the share capital of voestalpine AG by issuing 2,500,000 new no-par value bearer shares and thus by 1.45%. This capital increase was recorded in the Commercial Register on April 25, 2015.
• Resolution dated March 6, 2017: Increase of the share capital of voestalpine AG by issuing 1,400,000 new no-par value bearer shares and thus by 0.8%. This capital increase was recorded in the Commercial Register on March 30, 2017.
• Resolution dated December 3, 2018: Increase of the share capital of voestalpine AG by issuing 2,200,000 new no-par value bearer shares and thus by approx. 1.25%. This capital increase was recorded in the Commercial Register on January 26, 2019.

Under Article 4 (6) of the Articles of Incorporation, the Management Board of voestalpine AG is authorized to increase the share capital of the company by up to EUR 31,330,923.02 by issuing up to 17,244,916 ordinary no-par value bearer shares (= 10%) to be issued to creditors of financial instruments as defined in Section 174 Austrian Stock Corporation Act (Aktiengesetz – AktG) (convertible bonds, income bonds, or participation rights); the Management Board was authorized to issue these shares at the Annual General Meeting on July 2, 2014 (Contingent Capital Increase). To date, the Management Board has not exercised the authorization granted on July 2, 2014, to issue financial instruments as defined in Section 174 Austrian Stock Corporation Act.

At the Annual General Meeting on July 5, 2017, the Management Board was authorized for a period of 30 months to repurchase treasury shares representing up to 10% of the respective share capital. The buyback price may not be more than 20% less than or 10% higher than the average closing price of the shares on the three market trading days prior to the buyback. The Management Board has not exercised this authority to date.

Capital reserves mainly include the share premium (net of capital funding costs), gains/losses from the sale of treasury shares, and share-based compensation.

Reserves for treasury shares include the deducted acquisition cost and/or the increase in equity from disposals of treasury shares at cost.

Retained earnings include the profit after tax less dividend distributions. When majority interests are increased or decreased, the difference between the acquisition cost of the additional shares and the pro-rated carrying amount of the non-controlling interests is recognized directly in retained earnings. Actuarial gains and losses from provisions for severance payments and pension obligations are recognized directly and in full in retained earnings in the year in which they are incurred.

The translation reserve serves to cover all foreign currency differences arising from the translation of the financial statements of foreign subsidiaries.

The hedging reserve comprises gains and losses from the effective portion of the cash flow hedges. The cumulative gains or losses from hedged transactions recognized in the reserves are not recognized in the income statement until the hedged transaction also affects the result.

The number of shares outstanding for the periods presented in the Consolidated Financial Statements as of March 31, 2019, has changed as follows:

Hybrid capital

In the fourth quarter of the business year 2012/13, voestalpine AG issued a new subordinate, undated EUR 500.0 million bond (Hybrid Bond 2013) following an invitation extended to the holders of the Hybrid Bond 2007 to exchange the bond for a new hybrid bond at a 1:1 ratio. The outstanding nominal value of the Hybrid Bond 2007 as a result of this exchange was EUR 500.0 million; the bond was subsequently terminated and redeemed in full as of October 31, 2014. The coupon of the Hybrid Bond 2013 is 7.125% until October 31, 2014; 6% from October 31, 2014, to October 31, 2019; the 5-year swap rate is +4.93% from October 31, 2019, to October 31, 2024; and the 3-month EURIBOR is +4.93% plus a step-up of 1% starting from October 31, 2024. The Hybrid Bond 2013 may be called and redeemed by voestalpine AG, but not the creditors, for the first time on October 31, 2019. A total of EUR 30.0 million in interest payments on the Hybrid Bond 2013 was disbursed on October 31, 2018 (October 31, 2017: EUR 30.0 million).

As this instrument satisfies the equity criteria of IAS 32, the proceeds from the bond issues are recognized as part of equity. Accordingly, coupon payments are also presented as part of the appropriation of profit.

The issue costs of the Hybrid Bond 2013 were EUR 2.8 million, less a tax effect of EUR 0.7 million. This results in the recognition of hybrid capital in the amount of EUR 497.9 million in equity.

Share-based compensation

As part of the practice of granting employees voestalpine shares in connection with the annual performance bonus, 83.7 thousand shares with a market value of EUR 4.0 million (2017/18: EUR 1.6 million) were removed from equity for this purpose, and 43.5 thousand shares with a value of EUR 1.1 million (2017/18: EUR 4.1 million) were added to equity.