19. Provisions

The provisions for personnel expenses mainly include incentive payments and bonuses. Provisions for warranties and other risks as well as for onerous contracts concern current operating activities. The other provisions mainly consist of provisions for sales commission; litigation, legal, and consulting fees; and environmental protection obligations.

The amount recognized as a provision for warranties and other risks is calculated as the most reliable estimated amount that would be required to settle these obligations at the reporting date. The statistical measure is the expected value. In turn, this is based on the probability of an event occurring in the light of past experience.

Provisions for onerous contracts are recognized when the unavoidable cost of meeting the given contractual obligations exceed the expected revenue. Before recognizing separate provisions for an onerous contract, an entity recognizes an impairment loss on the assets associated with the given contract.

The provisions recognized in the annual financial statements 2017/18 in the amount of EUR 30.2 million for the matters in connection with the anti-trust proceedings relating to railway superstructure material as well as for the discontinuation of TSTG Schienen Technik GmbH & Co KG were reduced to EUR 26.3 million due to the use of these provisions in the business year 2018/19.

Entities of the High Performance Metals Division of the voestalpine Group were affected by proceedings of the German Federal Cartel Office (Bundeskartellamt) against companies that produce, process, or sell special steel products. These proceedings had already become public back in November 2015, following searches conducted at voestalpine’s competitors. The proceedings of the German Federal Cartel Office were triggered by an application under the Leniency Notice submitted by voestalpine AG. As the principal witness, no fines were imposed on the voestalpine Group. No provisions were recognized in this regard in the current reporting period.

In the course of the current investigations of the German Federal Cartel Office against steel producers, a search was conducted in the offices of voestalpine in Linz, Austria, from September 12 to 14, 2017, at the behest of the German Federal Cartel Office. The search took place with the cooperation of Austrian authorities on suspicion of anti-competitive practices in the Heavy Plate segment. voestalpine AG is taking these allegations very seriously and is cooperating with the authorities. Provisions were set up in the reporting period for any potentially adverse financial effects.

Increases in provisions totaling EUR 0.6 million (2017/18: EUR 0.7 million) are included in the reporting period due to both accrued interest and changes in the discount rate.