High Performance Metals Division

Market environment and business development

The sentiment in the environment of the High Performance Metals Division, which was promising at the start of the current business year, has gradually darkened over time. As a result, the summer of 2018 saw a decline in tool steel orders in Europe and China—the division’s key product segment. For one, this was triggered by the growing protectionist tendencies in global trade and, for another, by economic uncertainty in both aforementioned regions.

By contrast, the oil and natural gas sector developed along a more stable trajectory despite the substantial decline in oil prices over the past few months. Both innovative developments, especially those based on additive manufacturing processes (3D printing), and the creation of new, long-term customer relationships are increasingly enabling the division to gain market share in this industrial segment. Unit sales in the aerospace industry developed along a highly positive trajectory. This was helped along by the most recent investments in high-tech forging facilities for sophisticated aircraft components, which will continue to drive this segment’s growth in the years to come.

Although prices in the United States have risen (not least for tool steel) in the wake of the protectionist tariffs that were slapped on steel products, and although the division has been granted substantial exemptions for its products in the meantime, these protectionist policies have forced the division to confront indirect negative effects not just in China but also in other regions. While it profited in Europe from solid order activity in both mechanical engineering and the oil and natural gas sector, here too diversion effects resulting from various countries’ trade barriers have intensified competitive pressures. Brazil’s incremental recovery has continued despite the negative effects of protectionist tariffs in a number of exporting countries.

Manufacturing was buffeted by ambivalent trends in the first three quarters of 2018/19. Even though capacity utilization in the division’s core facilities for premium products was very high over the entire period, optimization measures at the operational level lowered capacity utilization in individual peripheral production facilities during the third quarter of 2018/19. Work on the new special steel plant in Kapfenberg, Austria, where the preparatory stages have largely been completed, continues apace. As a result of the changed market conditions, measures aimed at optimizing warehouse and inventory management were introduced in the Value Added Services segment.

Financial key performance indicators

The High Performance Metals Division boosted revenue in the first three quarters of 2018/19 from EUR 2,134.9 million in the previous year by 7.6% to EUR 2,297.3 million. This is due, for one, to a slight increase in delivery volumes and, for another, to higher prices that stem from the fact that the rising cost of raw materials, particularly alloys, are being passed on to customers. The earnings performance, however, was a bit weaker year over year. While earnings for the first two quarters of the business year were largely on par with the previous year, earnings for the third quarter of 2018/19 were weaker year over year, particularly due to lower volumes. Specifically, the operating result (EBITDA) fell by 2.9% from EUR 329.0 million (margin of 15.4%) in the first three quarters of the business year 2017/18 to EUR 319.4 million (margin of 13.9%) in the first nine months of the current business year. The profit from operations (EBIT) followed a similar trajectory: it dropped in the same period by 5.2% from EUR 218.9 million (margin of 10.3%) to EUR 207.5 million (margin of 9.0%).

A direct comparison of the second and third quarter of 2018/19 shows that both revenue and earnings declined in the latter. Specifically, revenue fell by 1.9% from EUR 765.6 million to EUR 751.4 million. This was due primarily to the decline in delivery volumes while prices overall rose slightly during the business year’s third quarter owing to the increase in the cost of alloys. At EUR 89.6 million and a margin of 11.9%, EBITDA for the third quarter of 2018/19 was 10.9% lower than in the preceding quarter (EUR 100.6 million, margin of 13.1%). EBIT dropped by 18.8% between the second and third quarter of the business year 2018/19, from EUR 63.8 million (margin of 8.3%) to EUR 51.8 million (margin of 6.9%).

As per the close of the third quarter of 2018/19, the High Performance Metals Division had 14,443 employees (FTE), an increase of 2.8% over the same reporting date the previous year (14,049). Relative to the figure (14,274) as of the end of the previous business year, the number of employees has risen by 1.2%.