High Performance Metals Division

Market environment and business development

The market environment of the High Performance Metals Division in the first quarter of the current business year was positively stable. This enabled the aerospace industry to operate at a high level, as before. In the oil and gas sector, the increase in oil prices led to rising investment activity along with associated effects on orders for sophisticated special materials. Thanks to its innovative own developments, the division also succeeds in gaining market share in this industrial sector. The first quarter of 2018/19 also saw the very first deliveries of products based on additive manufacturing processes (3D printing) to the oil and gas industry. The automotive industry, which is particularly relevant to demand for tool steel, continued the previous year’s positive trend at the start of the business year 2018/19. The performance of the consumer goods industry, another strong driver of orders for tool steel, was stable too. The first quarter saw the successful production of the very first components using additive manufacturing processes in toolmaking as well, which requires production processes that are tailored to individual customers’ needs.

Regionally speaking, the High Performance Metals Division benefitted from the strong momentum that continues unabated in Europe, its domestic market. So far, not even the Brexit has had any negative effects on orders received in this division. With the exception of the aerospace industry and the oil and gas sector, the economic sentiment in North America, by contrast, was more subdued. The tariffs on steel imports to the United States, which were introduced on June 1, 2018, have led to uncertainty in the market for special steel products. The Company has the—realistic—expectation, among others, that the protectionist policies will have not just positive effects on the long value chains in toolmaking. While the economic environment in Brazil has recovered slightly after several years of recession, at the start of the business year 2018/19 the economy was stuck at a level that is distinctively lower than the one prevailing at the onset of the downturn. Asia’s economic climate remained positive overall, although China’s current growth rates are weakening a little bit.

In manufacturing, capacity utilization of the key production facilities remained very good thanks to solid demand. The cornerstone for the new special steel plant at the Kapfenberg, Austria, site was laid on April 24, 2018. The Value Added Services business segment—which supplements production and has a global footprint—has focused the entire range of its portfolio on consistently distinguishing itself from the competition, which does not even come close to possessing comparable capabilities. The Performance & Transformation project was launched with the aim of leveraging the potential of digitalization to such an extent that the Company can actively participate in the shaping of substantial technological changes, especially as regards processes.

Pursuant to the recently issued court decision in the so-called “special steel cartel” case, which became known in November 2015 due to the investigations the German Federal Cartel Office (Bundeskartellamt) had launched at a number of competitors, the voestalpine Group avoided having to pay a fine thanks to the “principal witness” status it was granted.

Financial key performance indicators

At EUR 780.3 million, the revenue of the High Performance Metals Division in the first quarter of 2018/19 surpassed the revenue of EUR 739.3 million in the first quarter of 2017/18 by 5.5%. This increase is due to both higher unit sales—particularly of special materials for the aerospace industry as well as the oil and gas sector—and higher prices overall resulting from higher raw material costs. Earnings also improved slightly year over year. At EUR 129.2 million, the operating result (EBITDA) rose by 1.4% from EUR 127.4 million in the first quarter of 2017/18, causing the EBITDA margin to fall slightly from 17.2% to 16.6% on account of stronger revenue growth. Profit from operations (EBIT) improved in the same period by 2.6%, from EUR 89.6 million to EUR 91.9 million. This caused the EBIT margin to decline from 12.1% to 11.8%.

Due to good utilization of the division’s production capacities, at 14,344 (FTE) the number of employees in the High Performance Metals Division as of June 30, 2018, exceeds the previous year’s level of 13,823 (FTE) by 3.8%.