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Report on the Group’s business performance and the economic situation

This report is a translation of the original report in German, which is solely valid.

Europe/EU

Sentiment indicators reveal and hard economic data confirm that the economic momentum in Europe, which already began to grow at the start of the business year 2017/18, has continued to accelerate since then.

This positive development is buttressed to a substantial degree by intensifying investment activity, especially in manufacturing, but there is still room for growth in public spending. While private consumption, up to now the most significant driver of economic growth in Europe, remains at an excellent level, it has seen slightly dampened growth rates in recent months. Continuously improving labor market data with declining unemployment figures and an increase in newly created jobs in almost all EU member states support this development as much as does the momentum of the global economy.

Within the European Union, the gaps between individual member states’ level of economic development are beginning to close again: the signs are positive indeed. Political developments that are difficult to predict (e.g. the Brexit, protectionist and nationalist trends in individual countries both inside and outside Europe) as well as the uncertainty regarding the future trajectory of the financial markets currently pose the biggest risks to a longer-term economic upswing.

In an environment that is currently defined by positive expectations, also the European business activities of the voestalpine Group were very successful in the first half of 2017/18. For example, the most important customer segment, i.e. the automotive business that has been developing very well for several years now, continued to expand during the year, and demand from the consumer goods industry remained at a high level as well. The upswing in investment activities not only boosts demand from the mechanical engineering sector but also has a positive effect on the construction industry. By contrast, the project activity in the railway infrastructure business segment was less dynamic than in the previous years. The energy sector experienced countervailing trends: while the oil and gas sector showed signs of picking up after two weak years, even in Europe, power plant construction activities were virtually non-existent, as before.

USA/North America

In North America, the development to date of the business year 2017/18—especially in the United States—has been buffeted by considerable short-term volatilities, even though here, too, economic growth is being supported by an increasing willingness to invest owing not just to the good global economy but also to improved domestic demand. The oil and gas industry, in particular, has exhibited noticeable signs of a recovery in the past twelve months.

Private consumption, the most important pillar of the U.S. economy in recent years, has remained strong, driven in equal measure by solid labor market data and high expectations as to the tax reform that was announced a while ago.

However, hurricanes Harvey and Irma had a negative impact on economic activity in the United States in recent months. On the other hand, the assistance and support programs of about USD 15 billion that the Senate has released should be able to mitigate the fallout over the remainder of the year thanks to positive effects from reconstruction activities and the replacement of destroyed consumer products.

The recovery of the oil and gas industry in the NAFTA region, in particular, generated positive effects for the voestalpine Group in recent months with respect to both manufacturing and earnings, even though this market segment remained unsatisfactory despite strong volume growth. The aerospace industry developed well, albeit at a more volatile pace than in recent years. While the North American automotive market on the whole is experiencing a slight downward trend even though it still remains at a high level, no decline in orders has taken place to date at the voestalpine Group’s automotive facilities in the NAFTA region thanks to its focus on the production plants of European manufacturers.

Asia/China

Following a fairly good start into the year 2017, the Chinese economy lost some of its momentum during the summer—an event that was planned in detail and centrally managed. Aside from the intentional reduction in industrial activities, primarily out of environmental concerns, the momentum in consumption has weakened a bit as well. Chinese exports have dropped significantly in some economic sectors not least due to the anti-dumping measures taken in other economic areas. In turn this has fueled imports, a development that also stems from the appreciation of the Chinese currency with respect to the US dollar. In the aggregate, however, the Chinese economy is still growing at a solid pace.

As far as the voestalpine Group is concerned, for now this development has greater indirect effects in Europe than in China itself. In the past, Chinese manufacturers have repeatedly used significant export volumes to put pressure on international markets, particularly in the steel segment; this finally led to the introduction of anti-dumping duties in the main importing regions, first and foremost the United States and then Europe. The resulting reduction in pressure from Chinese imports has led to a substantial easing of prices in the European steel spot market in the year to date.

As before, market developments in China itself have been positive for the voestalpine Group even in the past six months. Both the automotive industry and the consumer goods sector, both of which are important customer segments for a number of voestalpine’s business units, have continued to develop along a favorable trajectory. In contrast to other economic regions in China, the railway infrastructure segment showed continued strong momentum in the first half of 2017/18.

South America/Brazil

Brazil, the most important economy by far on the South American continent for the voestalpine Group, seems to be experiencing an economic turnaround in 2017 thanks to a slight increase in domestic consumption and rising exports, yet the economy on the whole still shows very little momentum; so far consumer confidence, in particular, does not seem to have been restored to an adequate level. As before, the continued political instability, the financial weakness of the public sector as well as uncertainties regarding reforms put a damper on the economy, too.

voestalpine’s sites in Brazil responded to the multi-year downward trend by taking massive steps to reduce costs and boost efficiency, even making product portfolio adjustments in some areas. As a result, these sites have turned out to be surprisingly crisis resistant, which enabled them to benefit even in recent months from the slight easing of conditions in the economy.


About voestalpine

In its business segments, voestalpine is a globally leading technology and capital goods group with a unique combination of material and processing expertise. With its top-quality products and system solutions using steel and other metals, it is a leading partner to the automotive and consumer goods industries in Europe and to the aerospace, oil and gas industries worldwide. The voestalpine Group is also the world market leader in turnout technology, special rails, tool steel, and special sections.

Facts

50 Countries on all 5 continents
500 Group companies and locations
50,000 Employees worldwide

Earnings FY 2016/17

€ 11.3 Billion

Revenue

€ 1.54 Billion

EBITDA

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