The market environment of the Metal Forming Division’s two highest-grossing business segments, Automotive Components and Tubes & Sections, was characterized by declining momentum in the business year 2018/19, whereas the performance of the two smaller business segments, Precision Strip and Warehouse & Rack Solutions, was highly satisfactory throughout the business year. The fact that the division fell short of its performance in recent years stems not only from the dampening of economic sentiment, but also from the massive increase in the start-up costs of a new automotive component plant in the United States.
Following a solid start into the business year, demand from automotive manufacturers in Europe dropped sharply in the fall of 2018. The new Worldwide Harmonized Light Vehicle Test Procedure (WLTP) led to extensive cancellations of order call-ups after the previously announced summer plant closures, some of which were extended. This testing procedure, which has been binding on all newly licensed passenger car models since September 1, 2018, triggered a massive decline in sales in the European automotive industry. In contrast to the testing procedure that was replaced, compliance with emission standards now applies not just to series models, but also to models containing optional component packages that affect fuel consumption. The new test cycle posed a massive challenge particularly for those auto manufacturers that offer a wide range of models and options, with the result that models that had not yet been licensed were simply removed from the market. Against this backdrop, customers delayed their car purchases, thus bringing the upward trend in new vehicle registrations that Europe had experienced for many years to a grinding halt. In Germany, Europe’s largest automotive market, discussions concerning bans on older diesel-powered vehicles in major German cities also contributed to consumers’ uncertainty. The mood did not improve until the start of the calendar year 2019, but sales volumes in Europe continued to fall short of the excellent results achieved in the same period the previous year. While the automotive market in the United States stagnated at a good level in 2018, China experienced a sharp downturn in sales figures after the summer particularly with respect to domestic models. There, curtailed spending is due, for one, to the United States’ ongoing trade war against China and, for another, to driving bans in China’s metropolitan areas. The German premium producers, by contrast, were able to continue their growth trajectory in China in the calendar year 2018, too, despite the increase in tariffs on vehicles imported from their plants in the US.
While the distortions in the automotive sector of the single EU market at the European sites of the Automotive Components business segment clearly led to lower capacity utilization, especially in the second and third quarter of the business year 2018/19, the level of capacity utilization improved again in the business year’s last quarter. Thanks to the focus on the German premium segment, demand at the division’s sites beyond Europe—i.e. in China, South Africa, and North America—was very good throughout the business year. But the Cartersville, Georgia, USA, site, which was established in recent years, had to contend with massive start-up cost increases in the past business year in connection with series production. Difficulties in the plant’s complex production and logistics processes made it impossible to support the challenging production launch of new car models as planned. Aside from higher operating expenses during the start-up phase, the resulting significant start-up cost overruns were also due to the fact that orders were shifted to voestalpine’s Automotive Components companies in Europe as well as to international automotive suppliers. Intensive work was undertaken with the comprehensive help of internal support as well as external sources to address the areas in which problems had occurred and thus to boost productivity on an ongoing basis. Yet the fallout from these developments will affect the business year 2019/20 as well.
In the business year 2018/19, the Tubes & Sections business segment operated in an altogether average market environment. In Continental Europe, the segment benefited from the solid sentiment in the commercial vehicle, construction machinery, and agricultural machinery sector. Good market conditions in the construction industry also continued unabated. In Great Britain, however, the negative effects of the country’s impending withdrawal from the single European market have intensified. Although the Tubes & Sections business segment succeeded in gaining market share in the business year 2018/19 in the EU’s second-largest economy, the segment’s performance fell slightly short of that in the previous year. The passive safety components product segment, which manufactures high-tech tube components for safety belt tensioners as well as airbags among other things, clearly felt the consequences of the declining momentum in both Europe’s and China’s automotive sector. In Brazil, the slight economic recovery that had started in the previous year carried over into the business year 2018/19, with a focus on the implementation of solar and photovoltaics projects which, thanks to new and more economical technologies, have become increasingly independent of official support programs. In the United States, customer orders in the key customer segments—the aerospace and the construction industry—were positive throughout.
In the Precision Strip business segment, the overheating trends of the previous business year gave way in the business year 2018/19 to solid customer order levels. The extraordinarily long delivery schedules for special strip steel, bi-metal as well as saw steel have again returned to normal. Market conditions in both Europe and China were characterized by growing competition from Chinese producers. It has become increasingly difficult, furthermore, to pass the sharply rising alloy surcharges on to the customers. Based on its excellent international market position, the Precision Strip segment delivered highly satisfactory performance in the past business year as well.
The Warehouse & Rack Solutions business segment, which is specialized in the production and assembly of high-bay warehouses and system racks, succeeded in carrying the excellent sentiment of previous years over into the past business year. A multitude of industrial sectors have demand for this segment’s comprehensive expertise that ranges from the production of sections all the way to turnkey solutions. In particular, however, both the unbroken trend toward online sales and the associated investments in efficient warehousing systems are having a continued positive effect on this business segment’s project activity, which benefited particularly in North America from growing automation in high-bay warehouses.