Steel Division

Market environment and business development

The European steel manufacturers’ production volume rose dramatically in the course of 2017 thanks to the ongoing upturn in the European market despite continued large steel imports into Europe. While the demand for consumer goods has been developing along a positive trajectory for a few years due to the continued low-interest environment, 2017 finally saw a substantial increase in the demand for capital goods as well.

The decline in cheap imports from China as a result of the restrictions on trade that were imposed at the EU level was immediately offset by imports of products from other source countries, primarily India, South Korea, and Turkey. As far as raw materials are concerned, the prices of both iron ore and scrap as well as metallurgical coal rose toward the end of 2017 especially on account of China’s continued high demand for raw materials, weather-related bottlenecks in North America, and logistical problems in Australia.

Throughout the calendar year 2017, order levels in all of the Steel Division’s major customer segments were excellent—above all the automotive industry, which is the key driver of demand for high-quality steel grades. Following several years of volatility, in 2017 the European mechanical engineering sector finally gained considerable momentum, and the growth of the consumer goods sector (not least the white goods industry) was stable on a solid level. Overall sentiment in the construction industry, which had weakened over the years due to economic factors, improved noticeably in the past twelve months.

The Heavy Plate business segment performed much better than the challenging market environment would lead one to expect. While the number of awards in the pipeline segment of the oil and natural gas industry, a key customer segment, was modest at best, in its capacity as a provider of highest-quality heavy plate the division succeeded in securing several project awards based on most demanding specifications, for example, in the deep sea segment.

Once again, the successful shift of the product mix toward innovative, highest-quality products in keeping with the Group’s long-term strategy turned out to be the key to the Steel Division’s general success to date in the business year 2017/18.

The direct reduction plant in Corpus Christi, Texas, USA, became fully operational at the start of the business year 2017/18, but hurricane Harvey caused an unplanned production stop in the second quarter. Thanks to comprehensive preparatory and safety measures, however, the plant was started up again within a few weeks, thus ensuring unrestricted deliveries to external and Group customers alike.

Financial key performance indicators

The improvement in the Steel Division’s key financial performance indicators in the first three quarters of 2017/18 considerably bests that of the voestalpine Group’s other divisions. For one, the year-over-year increase in revenue by 28.5% from EUR 2,703.9 million to EUR 3,475.0 million stems from rising raw material costs. For another and in particular, it reflects the excellent demand for high-quality flat steel products. Because delivery volumes had already reached a very high level the previous year, besides the ongoing improvement of its product mix the division’s excellent earnings growth is largely due to the favorable environment in pricing terms along with the corresponding effects on the margins. The start-up losses incurred the previous year for the HBI facility in Corpus Christi, Texas, USA, also had an adverse effect on earnings in the same period the previous year. In a highly positive environment overall, the operating result (EBITDA) of the Steel Division rose year over year by 76.8% from EUR 368.9 million (margin of 13.6%) to EUR 652.2 million (margin of 18.8%), and the profit from operations (EBIT) by 168.8% from EUR 155.8 million (margin of 5.8%) to EUR 418.8 million (margin of 12.1%).

At 10,879 employees, as of December 31, 2017, the Steel Division had almost the same number of employees (FTE) as in the previous year (10,869 as of December 31, 2016).