Outlook*

Two months after publication of the forecast for the current business year in the annual financial statements 2015/16, the outlook for 2016/17 is largely unchanged. The qualification “largely” is not insignificant because the requirement set forth in the Annual Report for a sustained economic recovery due to de-escalation in the political trouble spots of the world appears to be less likely than it was at the time. Developments such as Brexit, the political crisis in Turkey, and the destabilization of entire countries by religiously motivated murders of unsuspecting citizens does not foster hopes of a broader economic recovery.

The economic parameters for the development in the next quarters have not, however, changed. The stable trend of demand at a high level from the automotive industry runs counter to continuing enormous price pressure and cautiousness regarding new investments worldwide in the energy sector, while continuing weak momentum in the European construction industry is counteracted by a quite solid development in the consumer goods industry, and volatility in the mechanical engineering sector faces the thriving railway sector that is profiting primarily from demand from Europe and China.

As emphasized at the presentation of the results of the business year 2015/16 in early June, the forecast for 2016/17 with regard to the earnings performance of the voestalpine Group anticipates that last year’s course will be reversed. While the first six months of the last business year were very strong, the second half of the year was significantly weaker (both adjusted for non-recurring effects). For 2016/17, an increase in the operating result is expected during the course of the year so that this year, EBIT and EBITDA in the second half of the business year will be considerably higher than the figures in the first half of the year. Three major factors are driving this development. First, the structural time-lag in the steel sector that is based on the longer-term contract business model, where positive price trends are reflected with significant delay in contrast to the spot market and will therefore not have an effect until later in the year. Second, almost all of the start-up costs of the direct reduction plant in Corpus Christi, Texas, USA, are being generated in the first half of the business year. And third, the situation in the oil and natural gas sector is not expected to ease up until the end of the business year, when inventories of sophisticated equipment are expected to decline.

Based on this scenario and in conjunction with the consistent continuation of the comprehensive cost and efficiency optimization programs, the voestalpine Group continues to aim for an operating result (EBITDA) and profit from operations (EBIT) that will come close to the figures in the last business year (adjusted figures).