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Metal Engineering Division

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

Market environment and business development

The Metal Engineering Division was organizationally realigned in the first half of the business year 2018/19 so that it can position itself even better than before as a provider of complete systems solutions in sophisticated industrial segments. For one, this entailed bundling competences in railway, turnout, and signaling technology to form the new Railway Systems business segment and, for another, combining the previously separate segments Wire Technology, Tubulars, and Welding Consumables into a new “Industrial Systems” business segment.

Market demand in Europe in the Railway Systems business segment has recovered slightly in the course of the 2018 calendar year to date after two difficult years, largely because of the need to catch up on maintenance investments, whereas project activity in new tracks remains merely moderate, as before. Yet the rails product area has succeeded nonetheless in the current business year to utilize its facilities to full capacity. The improved market environment has also resulted in slightly rising prices, which should have an effect once orders are processed over the next few quarters. The turnout systems segment has also benefitted from the accelerating recovery in Europe. After delaying a number of projects at the start of the year, recently the Chinese government substantially boosted investments in high-speed rail lines yet again. Activities related to the railway infrastructure in Australia’s and Brazil’s mining regions also expanded thanks to stable raw material prices. The momentum in the US’s heavy-haul transports segment has intensified as well, whereas the market environment in South Africa remains highly volatile. The signaling technology segment, which is positioning itself in the market as a provider of complete solutions and delivers digital sensor technology to railway operators, is in the process of rolling out its business model from Europe to the rest of the world.

Due to global protectionist tendencies, for one, and the downturn in the European automotive industry, for another, the Industrial Systems business segment fell slightly short of expectations at the start of the business year. The wire technology product segment, which is strongly aligned with the automotive sector, was confronted with a significant decline in demand from European auto manufacturers in the wake of the new WLTP emission rules in the second quarter. The momentum in the oil and natural gas sector in this division was as restrained as before, especially with respect to deep-sea projects.

While demand for Oil Country Tubular Goods (OTCG) products in the important US market has been very satisfactory during the 2018 calendar year to date, relative to local providers the seamless tubes segment has had to contend with sharply intensifying competition triggered by the introduction of protectionist “(Section 232)” tariffs on imports to the United States. In particular, this is due to the fact that it has not been possible to fully offset the 25% import duty through price increases, among other things because the large distributors in the oil and natural gas sector purchased sufficient quantities of OTCG products before the protectionist tariffs went into effect.

The welding consumables segment delivered average performance in the first half of the business year 2018/19. While demand in China for welding consumables remains solid, dampened expectations continue to shape the situation in Europe. This business segment intensified its cost optimization drive against this backdrop, pushing internal collaboration with other voestalpine companies with the aim of developing new business opportunities.

Financial key performance indicators

Quarterly development of the Metal Engineering Division

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Year over year, the revenue of the Metal Engineering Division rose by 2.4% from EUR 1,511.2 million to EUR 1,547.4 million. Both the recent increase in seamless tube delivery volumes and the improved pricing for wire technology had a positive impact on revenue. The Welding Consumables business segment also succeeded in expanding its business activities compared with the previous year. By contrast, the performance of the Railway Systems business segment in revenue terms was restrained, as before. The division’s earnings for the first six months of the business year 2018/19 are higher year over year. The wire technology segment delivered the biggest gains, especially because the start-up phase of the new wire rod mill had depressed earnings the previous year. In sum, the Metal Engineering Division succeeded in lifting its EBITDA by 3.4%, from EUR 177.7 million in the first half of the previous business year to EUR 183.8 million in the first half of the current business year. At 11.9%, there was only a slight improvement in the EBITDA margin (previous year: 11.8%). Due to the non-recurring EUR 15 million write-off in the wire technology segment in the previous year’s second quarter, at EUR 100.7 million (margin of 6.5%) EBIT for the first six months of the business year 2018/19 is substantially higher year over year (EUR 81.4 million and margin of 5.4%, respectively).

Quarter to quarter, the division’s key financial indicators weakened somewhat due especially to seasonal effects. Revenue fell from EUR 799.8 million in the first quarter of the business year 2018/19 by 6.5% to EUR 747.6 million in the second quarter. The division also had to contend with the slowdown in the automotive sector during the second quarter which, in turn, negatively affected the wire technology segment’s capacity utilization rate. Given that the US’s punitive tariffs on seamless tube deliveries have taken effect in part, quarter to quarter the operating result (EBITDA) dropped by 13.4% from EUR 98.5 million in the first quarter of the business year 2018/19 to EUR 85.3 million in the second quarter, lowering the EBITDA margin from 12.3% to 11.4%. Furthermore, a negative non-recurring effect of EUR 1.7 million in the second quarter of the business year 2018/19 dampened the earnings trend owing to an adjustment of the provisions for long-service bonuses (see the Notes for details). During the same period, the profit from operations (EBIT) fell by 21.1% from EUR 56.3 million (margin of 7.0%) in the first quarter of the business year 2018/19 to EUR 44.4 million (margin of 5.9%) in the second quarter.

At 13,512, the number of employees (FTE) in the Metal Engineering Division as of the close of the second quarter of the business year 2018/19 surpassed the previous year’s level (13,450) by 0.5%. Compared with the figure (13,481) as of the end of the previous business year, the number of employees has risen marginally by 0.2%.

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.


50 Countries on all 5 continents
500 Group companies and locations
51,600 Employees worldwide

Earnings FY 2017/18

€ 13 Billion


€ 2 Billion


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