Metal Forming Division

Market environment and business development

The economic environment of the Metal Forming Division in its key customer segment, Automotive, darkened during the summer after developing along a solid trajectory in the current business year’s first quarter. In part, the introduction of the new WLTP emissions testing procedure led to pull-forward effects in Europe on the production side and consequently to extended summer plant closures and/or additionally to temporary production stoppages. Given the new verification procedure, which made a new classification necessary for new vehicles at the latest by September 1, 2018, numerous European automakers cut back not just the range of their product offerings but also production on the whole. As a result, requests for components in the second quarter of the business year 2018/19 from the Group’s most important customers in the Automotive Components business segment fell far short of the previous quarters. This development is also reflected in the vehicle registration statistics, which show that the number of new vehicle registrations in July and August was still high but dropped off sharply in September.

Accordingly, the capacity utilization rate at the European sites of the Automotive Components business segment was substantially lower in the summer of 2018 compared to the previous year. Not so at the Cartersville, Georgia, USA, site, where demand pressure among other things has raised the start-up costs for the new facilities; this means that start-up costs for the current business year will far exceed the budgeted costs. By contrast, the operational launches of our new facilities in China and South Africa have progressed smoothly for the most part.

In the first six months of the current business year, the Tubes & Sections business segment operated in a largely average market environment. On the European continent, this business segment benefitted from solid demand in the commercial vehicle industry as well as the mechanical engineering and construction sectors. Great Britain, by contrast, is increasingly feeling the negative effects of the Brexit vote. Contrary to the positive economic data coming out of the US, orders for specialty tubes and sections were volatile at a relatively moderate level. While the economic environment in Brazil presented an improved picture, the across-the-board recovery cannot be expected until after the presidential election.

The Precision Strip business segment has transitioned from signs of overheating in the previous year to customers’ solid order activity in the first two quarters of the business year 2018/19. Regionally speaking, demand in China has lost a bit of steam, and order levels in Europe were a bit less dynamic, particularly in the important sawmill segment.

The Warehouse & Rack Solutions business segment continued to deliver strong performance in the first six months of the business year 2018/19. The ongoing shift toward online purchases has developed into a strong driver of demand for efficient storage systems. As a result, full production capacity utilization in this segment has already been secured beyond the close of the current business year.

Financial key performance indicators

The Metal Forming Division lifted its revenue from EUR 1,321.6 million in the first half of the business year 2017/18 by 9.3% to EUR 1,445.1 million in the first half of the business year 2018/19. For one, this is due to the fact that higher pre-materials prices were successfully passed on to customers and, for another, to the ongoing expansion of the division’s international activities, especially in the Automotive Components business segment. The earnings performance, however, trails the positive development of revenue. As a result, the operating result (EBITDA) for the first six months of the business year 2018/19 fell by 6.8% to EUR 152.6 million (margin of 10.6%), down from EUR 163.7 million (margin of 12.4%) the previous year. The losses are due, in particular, to the aforementioned start-up costs related to new facilities for the automotive segment in North America as well as the slightly weaker year-over-year performance of the Tubes & Sections business segment. The decline by 13.2% in the profit from operations (EBIT), from EUR 108.7 million in the previous business year to EUR 94.4 million in the current business year, also caused the EBIT margin to drop from 8.2% to 6.5%.

Comparing the first and second quarters of the business year 2018/19 shows that both revenue and earnings declined in the second quarter owing to the customary slowdown in demand during the summer, but also due to the economic downturn in the automotive industry. At EUR 697.1 million, revenue for the second quarter of the business year 2018/19 was 6.8 % less than in the first quarter (EUR 748.0 million). In earnings terms, the decline was even more pronounced. It stems mainly from the Automotive Components business segment, which suffered not only from lower demand in the European automotive industry but also from higher start-up costs at the Cartersville, Georgia, USA, plant. A negative non-recurring effect of EUR 0.7 million impacted earnings in the second quarter of the business year 2018/19 due to an adjustment in the provisions for long-service bonuses (see the Notes for details). This is the backdrop against which the Metal Forming Division posted EBITDA for the second quarter that is 19.2% lower than in the previous quarter. Specifically, it fell from EUR 84.4 million (margin of 11.3%) in the first quarter of the business year 2018/19 to EUR 68.2 million (margin of 9.8%) in the second quarter. EBIT dropped by 30.5% between the first and the second quarter of the business year 2018/19, from EUR 55.7 million (margin of 7.5%) to EUR 38.7 million (margin of 5.6%).

As of September 30, 2018, the number of employees (FTE) in the Metal Forming Division was 12,052 or 4.8% higher than the past year’s figure of 11,498. This increase is due primarily to the international expansion of the division’s automotive activities. Compared with the figure (12,003) as of the end of the business year 2017/18, there has been a marginal increase by 0.4% in the number of employees.