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Report on the Group’s business performance and the economic situation

The global economic landscape in the business year 2014/15 was largely characterized by a continuation of the trend seen in previous periods. While the economy in North America remained on a path of stable growth, despite a great deal of optimism in the early part of the year, Europe ultimately experienced a volatile trend that was once again very cautious in its overall perspective. Of the most important emerging markets, China continued to be the sole reliable growth region. Due to the Ukraine conflict, Russia slipped into recession. Brazil’s quarterly reports alternated between recession and stagnation as a result of homegrown problems. And in India, efforts by the new government to reignite the economy began to make themselves felt but did not culminate in any really notable results.

The most significant supraregional developments in the past business year were the considerable shift in the global rate of exchange maze with a US dollar that kept getting stronger and a weakening of the yen, the yuan, and the euro on one hand and on the other, massive pressure on many raw materials prices, particularly iron ore and oil. While this development abetted undesirable deflationary trends on one hand, on the other, it was precisely the low oil price that raised expectations of a positive global impact on consumption that would stimulate economic growth.


Europe started the business year 2014/15 with a solid wind in its sails economically speaking. In addition to improving private consumption in a number of countries, the early part of the year saw the first noticeable positive signs in a long time in the construction industry, which, however, flattened out somewhat even before the first half of the year was over. Over the summer, the European economy cooled substantially, not least due to the escalation in the Ukraine with the subsequent tensions between Russia and the West. The fall saw a phase of increased economic volatility that evolved into a moderate revival of growth toward the end of the 2014 calendar year. The positive development was driven to a large extent by private consumption, while investment activity in Europe—like the entire business year 2014/15 overall—remained weak. This was the direct result of a continued high level of sovereign debt in a number of nations and exports that continued to be subdued as a result of sluggish development in many former emerging markets.

Toward the end of the calendar year, the European Central Bank announced an expanded quantitative easing program to purchase bonds in order to counter the risk of increasing deflationary tendencies due to an overlong phase of low inflation. The measure to stimulate the economy had a direct positive impact on the economic situation. Together with euro that is weakening vis-à-vis the other important global currencies, notably the US dollar, and thus making it easier for exports, in the past few months, Europe has been experiencing an economic trend that—for the first time in quite a while—is showing increasing and broad-based momentum. Only Greece has not been able to match this recovery that has become noticeable in the countries along Europe’s southern periphery; Spain and Portugal are increasingly reporting positive growth trends, and the situation in Italy has stabilized and the country is no longer in a recession.

In this environment, the business trend in Europe for voestalpine has been quite satisfactory, albeit it was quite volatile at various points of the year. While the automobile industry, the Group’s most important segment, improved its already very good level (with positive effects on all four divisions), the situation in the European construction industry, which had improved at the beginning of the year, waned increasingly as the year progressed. In contrast, in the area of transportation infrastructure, the European railway market has demonstrated growing momentum, but large portions of the energy sector have experienced a massive economic slump in the wake of the sanctions resulting from the escalation of the Russian-Ukrainian conflict and the rapidly deteriorating oil price. The mechanical engineering sector has been mostly weak, although there were some signs of recovery toward the end of 2014, while the white goods and consumer goods industries have shown a mostly unremarkable trend throughout the year.

North America

The development in North America has been mostly exactly the opposite to the situation in Europe. A positive growth trend remained largely stable over the course of the past business year; only toward the beginning of the 2015 calendar year did the economy cool somewhat, but this represented more of a stabilization at a high level than any kind of downturn.

As the year progressed, economic forecasts were revised upward multiple times, the leading macroeconomic indicators achieved record levels, and the unemployment rate continued to decline. In this environment, the Fed (Federal Reserve) announced that it was considering ending its low interest policies. However, toward the end of the 2014 calendar year, this line of thought became more and more cautious and open to more interpretation. The reason for this are the slightly less favorable growth expectations due to the relative strength of the US dollar vis-à-vis the euro and other currencies since the early part of 2015, which made it increasingly difficult for US exports.

The somewhat subdued economic development in the USA since the beginning of 2015 is presumably also the result of somewhat lower public sector spending on one hand and harsh weather conditions, especially the unusually tough winter in many parts of the country, on the other. Furthermore, the sharp global fall of the oil price has seriously undermined investments associated with exploration activities in states with intensive oil and natural gas production.

Overall, however, the slightly slower economic growth in the first calendar quarter of 2015 should be seen as a temporary phase of consolidation rather than an economic trend reversal, and the expectation is that the summer months will see a return to the growth path of the past several years.

Economic development in Canada has generally been considerably weaker, however, the country has been largely spared from the negative effects of the financial and economic crisis in recent years. On the other hand, the Mexican economy has been making even more progress than the US economy. This is being driven by policies that have been ever more liberal in the last few years, making Mexico a real hot spot on the investment map of many industrial sectors.

For voestalpine, this environment in North America has meant excellent demand for automotive components right off the bat from the Metal Forming Division’s newly erected plant in Cartersville, Georgia, and solid development in the Special Steel Division’s tool steel and high-speed steel segments, which is also being driven by the automotive sector as well as the consumer goods industry.

The development in the railway infrastructure market (Metal Engineering Division) continues to be favorable; the same applies to the aviation industry, where demand for components manufactured by the Special Steel and Metal Forming Divisions remains strong.

Diminishing oil and natural gas exploration activity is currently the one weak point of the US economy. Toward the end of the business year, this had an adverse impact on the seamless tube business of the Metal Engineering Division.

Brazil / South America

The crisis-ridden economic situation in Brazil with high inflation and high interest rates continued in the business year 2014/15. In addition to internal problems, the global deflationary development with regard to raw materials prices is contributing to the difficult situation of the largest economy in South America. Even though as of the end of the 2014 calendar year, Brazil is technically no longer in a recession and rudimentary growth of 0.3% compared to the same quarter of the previous year was reported, an improvement of the economic development cannot be expected in the short term as—instead of changing structural framework conditions—the country’s reaction has been to wall itself off from the global market by way of import duties. Overall, however, growth rates of only 1 to 2% are expected for Brazil in 2015 and 2016, figures that are clearly too low for an emerging economy and that do not do justice to the country’s enormous economic potential.

In this environment, voestalpine faced challenging framework conditions in practically all market segments; however, by orienting itself even more strongly toward exports and by undertaking massive efficiency improvement measures, earnings were largely kept at a stable level.

The economic development of the other South American countries has been critical almost without exception for some time, resulting in cautious investment activity.

China / Asia

Although leading macroeconomic indicators such as the Chinese PMI (Purchasing Manager Index) fell under 50 points during the past year, fueling fears about imminent weaknesses in the largest Asian economy, China was nevertheless again able to achieve economic growth of around 7% in 2014—not least because of intervention by the central government, which primarily consisted of a more expansive money market policy and new stimulus programs. Nevertheless, in the early part of 2015, imports fell, and industrial development in January and February 2015 was surprisingly subdued. Uncertainty has also surrounded the real estate market, with property prices falling and new construction diminishing. While the country itself has very little debt, fears relating to hidden credit bubbles emerging from the shadow banking industry are stoking economic uncertainty.

When assessing the current situation, however, it should not be overlooked that in recent years, China usually started the year with weak growth and then recovered. For 2015, macroeconomists are therefore anticipating economic growth in the neighborhood of 6% to 7%, with expectations tending toward the higher figure. The fact that many industries continue to develop quite positively is one of the reasons for this forecast. In 2014, China replaced the USA as the largest automobile market worldwide. Sales of products manufactured in the newly built voestalpine plants for automobile components (Metal Forming Division) are therefore going well and sales to the automotive sector in China by the Special Steel Division (tool steel and high-speed steel) show a solid level of demand. Investments in expansion in the railway infrastructure sector also remained at a high level, so that—despite the generally rather cautious mood—the region continues to develop very positively for the voestalpine Group.

In 2014, the economic development of the countries of Southeast Asia was for the most part dynamic. Japan, however, lagged considerably behind the original growth expectations despite its export-friendly currency policies. voestalpine activities in this region are primarily undertaken by the Special Steel Division. Even in a global comparison, these activities are characterized by very strong growth.

Due to its new government, India is expected to increase its economic momentum in the coming years, although 2014 was still very much characterized by the transition between the old and new governments. Should the generally positive expectations for the Indian market be fulfilled, it will have significant future potential for the voestalpine Group.

Business performance of the divisions

The Steel Division with its clear market focus on Europe experienced a good level of demand for high-quality steel products, at the same time however, it also faced falling prices due to the deflationary development of raw materials prices. Nevertheless, it was possible to more than compensate this development through volume increases on one hand and on the other, by way of the first positive effects of the cost optimization and efficiency improvement measures that had been decided upon in 2014. Thus, the business year 2014/15 showed clearly improved earnings compared to the previous year, even though the level of earnings is still far removed from pre-crisis figures.

Due to its global presence, the Special Steel Division profited from the positive economic environment in North America and Asia, where demand for high quality tool steel and special materials across most industry segments was at a solid level. Toward the end of the business year, the market recovered somewhat in Europe as well, so that the business year 2014/15 was ultimately quite positive overall for the Special Steel Division as far as earnings are concerned compared to previous years.

The Metal Engineering Division was once again able to continue its outstanding performance in recent years in the business year 2014/15 as well, driven primarily by strong demand from the railway infrastructure sector in North America, Europe, and Asia. This development was supported and sustained by comparable earnings in the Wire, Seamless Tube, and Welding Consumables business segments.

In the automobile component segment, the development of the Metal Forming Division continued to be characterized by very good demand in Europe, but also at the newly constructed sites in North America, Asia, and South Africa. Activities in the Special Section and Precision Strip business segments found a satisfactory global market environment overall, so that, overall, the still young division enjoyed a sustained solid performance in the business year 2014/15.

About voestalpine

The voestalpine Group is a steel-based technology and capital goods group that operates worldwide. With its top-quality products, the Group is one of the leading partners to the automotive and consumer goods industries in Europe and to the oil and gas industries worldwide.


50 Countries on all 5 continents
500 Group companies and locations
48,100 Employees worldwide

Earnings FY 2014/15

€ 11.2 Billion


€ 1.5 Billion


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