When the Letter to Shareholders for the first quarter of 2014/15 was published in the summer of this year, the overall economic situation seemed to indicate that a stable or even an upward trajectory could be expected for the remainder of the year, however, in the meantime, the signs of economic growth—at least in Europe—have faded. The continuing political and military destabilization in parts of the Middle East as well as the Russia-Ukraine conflict with its escalating sanction mechanisms are taking an increasing toll on the European economy. Additionally, a lack of confidence in the future as a result of an increasing recessive trend in some EU core nations and a certain leadership vacuum surrounding the changing of the guard at the European Commission have also impacted Europe’s economic development. In any case, all of these aspects have not contributed to an improvement of sentiment.
The economic performance of the USA, however, continues to be strong, and China is succeeding in maintaining stable growth of 7% over the course of the year. In clear contrast, the negative economic development in Brazil and Russia has continued.
Regarding the current trends in the industrial sectors that are most important for the voestalpine Group, there is increasing differentiation among the various sectors. While the performance of the automobile industry worldwide is marked by continuing demand and the situation in the aviation and railway infrastructure industries is the same or at least similar, the slight uptrend in the construction, mechanical engineering, and electrical industries that persisted until the summer has not continued in the last few months, at least in Europe. The trend in the conventional energy generation industry has remained weak, while the development in the oil and natural gas sectors has continued to be very favorable worldwide despite the fact that the oil price has dropped sharply. As a result of major pipeline projects that have been recently awarded, there is an upward trend in energy transport sector as well. Performance of the consumer goods and white goods industries is stable, albeit not very remarkable and the agricultural machinery industry is trending significantly weaker.
Even though the economic framework conditions in Europe have not improved as had been hoped in the beginning of the year, it can be anticipated that in the second half of the business year 2014/15, all four of the Group’s divisions will enjoy practically full capacity utilization. Although most business sectors continue to experience strong price pressure, efficiency improvement and cost optimization programs that are in place in all the divisions and the accelerated development of markets outside of Europe should make it feasible to slightly improve profitability compared to the previous year even without taking any possible extraordinary income into account.
This means that the outlook for the current business year remains unchanged. From the current vantage point, it can be expected that the voestalpine Group will have an operating result (EBITDA) and profit from operations (EBIT) in 2014/15 that are slightly above the level of the past business year.