The development of the global economy was inconsistent in the early part of the business year 2014/15, with the major trends being the slowdown in growth rates in the emerging markets on one hand and on the other, a development in the mature economies that was somewhat better than anticipated.
Long stretches of the last business year were marked by a more optimistic mood in Europe but unsatisfactory real numbers, and the new business year began with a continuation of the positive trend that has prevailed since the beginning of the 2014 calendar year. In recent months, the major economic indicators have been stable for the most part. Besides sustained strong exports, most recently demand in Europe has risen. The primary reason is improved consumer confidence, with a secondary reason being an increase in capital investments due to rising industry production and the underinvestment that characterized the last few years.
The clear commitment of the European Central Bank to strengthen the European economy by implementing an action plan to incentivize the granting of loans as well as the historical step of cutting the interest rate for deposits to a negative level (–0.1%) are also having a positive impact on the economic climate in Europe.
On the other hand, the latest escalations in the conflict involving the Ukraine are creating uncertainty, but at the moment, they are mainly affecting the Russian economy. However, negative consequences for the European economy overall represent an increasing risk as far as further developments are concerned.
In North America, especially in the USA, the first quarter of the business year 2014/15 had a very strong start. This trend is in part due to catch-up effects from the previous quarter due to the unusually harsh winter. The economic indicators for the USA are continuing to show growth both with regard to consumer confidence and business confidence. In June, the influential Purchasing Manager Index (PMI) showed the strongest growth in more than four years, leading to the conclusion that a sustained, positive overall trend will dominate the summer months.
Brazil, the most important South American economy for voestalpine, has still not be able to return to the growth rates it had enjoyed in past years. It is anticipated that its GDP growth in 2014 will be less than 2%. In addition to the country’s structural weaknesses, the recent more restrictive financial policy, which is dampening the already weak sentiment, is responsible for this development.
The 2014 calendar year began somewhat weakly for the Chinese economy compared to the growth rates it had experienced in the past. It was not until the end of the first half of the year that economic indicators became more robust. The reason for this subdued development were the efforts of the central government to achieve a better balance in the country’s economic structure and to gradually reduce state investment programs. Overall, however, the Chinese economy is expected to grow by 7% in 2014.
Against this macroeconomic backdrop, the operating performance of the individual divisions of the voestalpine Group in the first quarter of the business year 2014/15 was quite satisfactory.
The Steel Division, a primarily European player, profited from improved demand from the automotive sector and the initial recovery stages in the pipeline sector, while demand in the other market segments was largely stable.
The Special Steel Division benefited mainly from the prospering markets in the USA and Asia—particularly China. In contrast, this division’s European markets continued to be subdued.
The broad-based positioning of the Metal Engineering Division and the continuing good development of all its business units enabled the division to again post a very satisfactory quarterly result.
In the Automotive Parts business segment, the Metal Forming Division continued its very good performance, however, compared to the previous quarter, results for the Tubes & Sections business segment were slightly down as the inventory effects diminished. Overall, however, the division continues to perform at a very solid level.