Letter to Shareholders*

“… All of this is not the stuff that rapid economic recovery is made of, but rather the stuff of new cost and efficiency optimization programs. But whatever comes—this will not be the first time that voestalpine takes its future into its own hands.” This was the summary of the overall economic situation in our letter to shareholders on November 9, 2015, in our report on the first half of the business year 2015/16.

Today, three months later, we are, in fact, no closer to a deescalation of the situation, not to mention an actual broad-based recovery. Nothing has come of a trend reversal in the oil price, nothing has come of the hoped for economic stabilization in China or a rethinking of the mechanism that has imposed sanctions between the European Union and Russia, and nothing has come of a European solution for the refugee problem or a real peace initiative for the Middle East. From our industry’s perspective, two other items have to be at the top of this list of crises. One is the fact that the EU institutions have the intention of escalating the framework conditions for energy-intensive industries. And the other is the absolutely unprecedented flood of subsidized steel imports into the European Union. Thus far, an appropriate reaction from the EU Commission has been absent. In any case, the current behavior of the majority of the political decision-makers in Europe does not indicate a real interest in maintaining Europe’s fundamental industrial infrastructure. If this is indeed the case, it would be only logical to communicate this and to develop a political response to the consequences of such a step in the interests of clarity and security for all those involved.

For the voestalpine Group, there can only be one response to all of these developments: continued and accelerated expansion of our technology and quality leadership in our core sectors, while concurrently intensifying our endeavors to optimize costs and increase efficiency. The expansion of our technology and quality leadership means not only a continuing increase of our research and development activities—both with regard to products and processes—but the consistent realization of our ongoing and planned investment projects. This will enable us to reinforce our unique selling points in the most sophisticated product sectors based on a corporate philosophy that aligns the value chain with the needs of our end customers. The fact that the Group’s performance has remained so solid in a market environment that is extraordinarily difficult confirms yet again that the strategy we have been pursuing without compromise over the last fifteen years was exactly right. Continuing on this path will—without a doubt—remain challenging, not least from a financial perspective. In the interest of ensuring the economic sustainability of the voestalpine Group’s financial standing, the implementation of investments is always undertaken under the imperative that they can be reduced by up to 50 percent—if necessary, in the very short term—in the event of a persistent worsening of the economy, comparable to what happened from 2009 to 2011.

Apart from such considerations, which are not applicable at the present time, our targets with regard to profit optimization are being raised as a result of the ongoing difficult market development in the quarter under review. Concretely, this means that the three-year (i.e., until the end of the business year 2016/17) EUR-900-million program to increase efficiency and optimize earnings, which was decided in March 2014, will be expanded in the coming twelve months by EUR 100 million to a total of EUR 1 billion so that additional measures can be taken. This will enable us to ensure the Group’s stable earnings performance—as we have been able to do in the past two years—despite the critical economic framework conditions. For us, this goal is both an obligation and a challenge, not only in the interests of our company and its employees, but also as an integral part of maintaining a reliable and lasting partnership with our customers and shareholders.

Linz, February 9, 2016

The Management Board