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Report on the Group’s business performance and the economic situation

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

There is no doubt that, at the macroeconomic level, developments during the first half of the business year 2018/19 were shaped primarily by the global trade war that the United States started. Besides China—the main target so far of the protectionist policies—as well as a number of other countries, the US has also antagonized erstwhile allies such as Europe and made abundantly clear even to its closest neighbors, Canada and Mexico, by terminating NAFTA that it was interested in more than merely amending the trade agreement. The economies of the countries that are key to the voestalpine Group developed along different trajectories in this environment.


The protectionist aims of the United States did not have much of an impact on economic activity in Europe during the first half of the business year 2018/19—at least until now. Domestic European demand, in particular, has been solid in most countries and industries and thus has provided the basis for the growth momentum that remained strong throughout almost the entire period.

Not until the second quarter of the business year 2018/19 did slightly weakening growth rates and falling indicators of economic sentiment such as the PMI Composite or the EU Sentiment Indicator point to a slight slowing in economic growth down the road.

Aside from Great Britain (which is hamstrung by the Brexit issue), however, the German economy also developed along a slightly weaker trajectory within the rather solid environment overall that held sway in Europe during the first half of the business year 2018/19. In addition to more moderate revenue from foreign trade on the whole and shrinking exports, this was due mainly to the substantially subdued performance of the automotive industry especially in response to problems associated with the implementation of the new emissions testing rules, the so-called Worldwide Harmonized Light Vehicle Test Procedure (WLTP). Given the relevance of the automotive industry to the economy on the whole for Germany as an important business center, its downturn had a major impact on industrial production statistics.

voestalpine benefitted in the first few months of the current business year from otherwise solid demand across all sectors. Particularly the construction industry, but the mechanical engineering industry also, were borne along by strong demand that continued unabated throughout Europe. Compared to the previous quarters, the Railways segment did develop some momentum, but the latter was largely limited to volume and prices are still lagging far behind.

The distortions in the automotive industry that stem from the new emissions tests finally also impacted the voestalpine Group toward the end of the first half of the business year in the form of slightly lower order volumes. Even the changes in international trade flows resulting from increasingly protectionist economic policies in an ever increasing number of countries, which we merely observed at the beginning, actually started to have negative effects at the end of the first half of the business year 2018/19 on tool steel prices in Europe, for example.

North America

Economic growth in North America remained strong on the whole during the first half of the business year 2018/19. Consumer confidence has remained high and thanks not least to strong domestic demand, which continues unabated, the general economic climate has not been affected either by the most recent trade war conflicts. All of this is playing out against the backdrop of an unemployment rate that is as low as it last was in 1969 and thus is causing household income in the US to grow again for the first time in years. And the recently signed new trade agreement with Canada and Mexico (USMCA) has put an end to the widespread uncertainty that the termination of NAFTA had triggered, thus further strengthening people’s confidence in positive economic growth.

The punitive tariffs that took effect in June 2018 on national security grounds (Section 232) have helped the US steel industry to enact massive price increases. So far, the resistance of the processing industries has been negligible, possibly also on account of last year’s tax reform that led to significant reductions in corporate taxes.

The voestalpine Group has profited from this exceedingly positive economic environment thanks to excellent demand from the aerospace industry, the storage technology sector, and the construction industry in general. This also applies to the railway infrastructure segment that has been showing substantial signs of a recovery after mere moderate demand just a year earlier. By contrast, the voestalpine Group has been unable to benefit fully from the developments in the oil and natural gas industry, which experienced highly pleasing demand growth overall in the first half of the business year 2018/19, due to the punitive US tariffs. In the automotive industry, which is contracting a bit in North America yet still developing at a high level, to date voestalpine has supported primarily the US activities of European automotive manufacturers. Several new facilities are currently being started up simultaneously at the Group’s largest and most complex automotive components plant in North America, which is located in Cartersville, Georgia, USA; the associated start-up costs will continue to impact the plant’s bottom line up to the summer of 2019.

South America / Brazil

While the Brazilian economy on the whole is on track for a recovery, so far the actual process has been very slow to start after four years of recession. Aside from negative political headlines and many months of presidential electioneering, the gradual strengthening of the US dollar against the Brazilian real and rising interest rates in the dollar sphere are also inhibiting the recovery. The Brazilian currency has been highly volatile, furthermore, and the critical state of affairs in South America overall, especially in Argentina and Venezuela, has not provided much support either.

In contrast to this macroeconomic environment, which remains critical, voestalpine’s Brazilian entities in the tool steel, special materials, special sections, and railway systems infrastructure business segments have delivered solid growth.

Asia / China

China, the main target of the current US Administration’s protectionist trade policies, is suffering increasingly from their fallout, even though the published economic data continue to paint a robust picture. The Chinese central government reacted immediately in the spring of 2018 to the fears of dampened economic growth by lowering interest rates and enacting stimulus packages. This not only improved the economic sentiment in general but also boosted investments. Most recently, however, exports have declined anyway in the face of the country’s trade war with the United States.

In this environment, voestalpine benefitted in the railway infrastructure sector from the renewed strength of infrastructure investments, whereas the market for tool steel has shown clear signs of a slowdown, which stems not least from the downward trend in the automotive segment.

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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