Outlook*

The development of the global economy during the entire first part of the business year 2016/17 was overshadowed by political crises in an increasing number of countries and regions, some of which kept escalating. The result has been weakening economic momentum worldwide since 2013 and fewer and fewer countries have been immune to this development. As, at the same time, the positive effects of a zero interest-rate policy, both in the EU and in the USA, are reaching their limits, the prerequisites necessary for a speedy and broad-based economic recovery are not being met.

Against this backdrop, the stability and hardiness of economic growth in the European Union is remarkable. At 1.8%, it is not exactly vigorous but—in contrast to the development in the USA—it has shown itself to be quite sustainable in the course of the year thus far.

The expectations in the main customer industries of the voestalpine Group have also not changed much compared to previous forecasts. Stable demand from the automotive industry at a high level is in contrast to an energy sector that is still characterized by enormous price pressure and cautious investment behavior worldwide. Nevertheless, a slight trend reversal of the development of the past 18 months seems to be on the horizon for the first half of 2017 in the oil and natural gas sectors, where at least sales volume appears set to recover somewhat. The European building and construction sector is still not showing any noticeable signs of a recovery, however, the trend in the consumer goods industry has remained solid. The volatility of the mechanical engineering sector, which has been in evidence for quite some time, is not expected to change in the near future. The trend in the aerospace sector appears to be remaining stable at a high level, at least in the short term, while demand in the railway sector is currently far more differentiated according to region than at the beginning of the business year.

The earnings performance of the voestalpine Group in the second half of the business year should confirm the forecast made at the beginning of the year, according to which last year’s course will be reversed. While in 2015/16, a very strong first half of the year was contrasted with a substantially weaker second half—both adjusted for non-recurring effects—from today’s vantage point it appears that in 2016/17, the second half of the year will see an improvement of EBITDA and EBIT compared to the first six months of the year. This expectation is confirmed by the movement from the first to the second quarter that saw prices recover considerably in the Steel Division’s contract business, resulting in a strong improvement in the division’s and therefore also the Group’s earnings. The rise of raw materials prices since the summer, in particular of coal but also of ore, is not yet expected to have a noticeable impact on the margins in the third quarter of the business year. To what extent this will negatively impact earnings will depend on the development of the steel prices.

Against the backdrop of this economic scenario and taking the positive effects of the consistent continuation of the comprehensive cost optimization and efficiency improvement programs into consideration, actual expectations for the business year 2016/17 are as follows: The target is unchanged to achieve profit from operations (EBIT) that will come close to the figures in the last business year (adjusted figure). With respect to operating result (EBITDA) a repetition of the adjusted figure from last year should now be possible.