Report on the financial key performance indicators of the voestalpine Group

While the revenue of the voestalpine Group rose by 5.9% from EUR 6,302.3 million in the first half of the business year 2017/18 to EUR 6,674.0 million in the first half of the business year 2018/19, the results for the current period fall short year over year for a number of reasons. While all four of the Group’s divisions succeeded in lifting revenue, only the High Performance Metals Division and the Metal Engineering Division posted higher earnings.

Among other things, the growth of revenue in the Steel Division stems from an improved product mix in the Heavy Plate business segment which, in turn, stems from the delivery of very high-quality products for the oil and natural gas sector in the first six months of the business year 2018/19. Together with slight price increases on the whole compared to the previous year, this enabled the division to more than offset the declines in volume resulting from the major overhaul of its most important blast furnace. In terms of volume, the loss of production capacity owing to the repairs was largely offset through purchases of slabs from third parties and the use of the pre-materials inventory that had been built up for this purpose, thus ensuring continuous supplies to the downstream rolling facilities. For reasons related to both logistics and production, however, deliveries declined year over year on account of the repairs by some 10%. Both the repair-related unavailability of the blast furnace during a period of more than three and one half months and the associated peripheral costs (replacement purchases of electricity and natural gas, etc.) are the main reasons for the Steel Division’s earnings decline in the first half of the business year 2018/19.

The High Performance Metals Division, by contrast, posted not only a revenue increase in the first two quarters of the business year 2018/19 compared with the previous year, but also improved earnings. This development is due both to higher prices and a slight increase in unit sales.

The Metal Engineering Division, for its part, also succeeded in delivering year-over-year gains in the first six months of the business year 2018/19 with respect not just to revenue but also to earnings. Here, particularly the growth in delivery volumes for seamless tubes, the greater demand for welding consumables as well as the increase in the sales prices for wire technology had a positive impact on revenue. In terms of earnings, the Wire Technology business segment achieved substantial growth, because the start-up phase of the new wire rolling mill had negatively affected its performance the previous year. In addition, this segment took a non-recurring EUR 15 million write-off in the previous year, with the resulting negative effect on its profit from operations (EBIT).

The Metal Forming Division, by contrast, succeeded in boosting its revenue in the first half of the business year 2018/19, but had to contend with a simultaneous decline in profitability. Both the fact that higher pre-materials prices were passed on and the ongoing expansion of the division’s international activities in the Automotive Components business segment were responsible for the division’s revenue growth. The increase in the start-up costs of new facilities for the automotive industry in North America, for one, and the slight reduction in earnings in the Tubes & Sections segment, for another, were the main factors in its earnings decline.

Against this backdrop, the operating result (EBITDA) of the voestalpine Group was down by 11.2% in the first half of the business year 2018/19, falling from EUR 968.9 million in the same period of the previous year to currently EUR 860.1 million. The profit from operations (EBIT) dropped in the same period from EUR 584.2 million to EUR 479.5 million—a decline of 17.9%. However, both EBITDA and EBIT also contain a total of EUR 7.7 million in negative non-recurring effects from the required adjustment of the provisions for long-service bonuses (see the Notes for details). The profit before tax fell by the same rate as EBIT, specifically, from EUR 513.6 million in the first half of the business year 2017/18 to EUR 421.5 million in the first half of the business year 2018/19—a decline of 17.9%, too. Year over year, the profit after tax dropped 18.7% from EUR 388.9 million to EUR 316.2 million.

Due to the positive earnings growth in the past 12 months, the equity of the voestalpine Group rose from EUR 6,183.8 million as of September 30, 2017, to EUR 6,550.9 million as of September 30, 2018. At EUR 6,554.3 million, equity remained stable relative to the March 31, 2018 reporting date. Net financial debt rose year over year, specifically, from EUR 3,310.3 million as of September 30, 2017, to EUR 3,599.0 million as of September 30, 2018. For the most part, this is due to the substantial increase in working capital which, in turn, stemmed from higher costs for raw materials but also from the general growth of the Group’s business—particularly the international expansion of its activities in the Automotive Components business segment of the Metal Forming Division. Relative to the March 31, 2018, reporting date (EUR 2,995.1 million), net financial debt rose to a greater extent owing to the fact that, aside from the aforementioned increase in working capital, the distribution of some EUR 250 million in dividends has a stronger effect, mathematically speaking, in the second business quarter. Against this backdrop, the gearing ratio (i.e. net financial debt as a percentage of equity) rose slightly year over year, from 53.5% as of September 30, 2017, to 54.9% as of September 30, 2018; it was much higher, however, relative to the March 31, 2018, reporting date (45.7%).

As of September 30, 2018, the voestalpine Group had 51,931 employees (FTE), which corresponds to a 2.6% increase year over year, up from 50,638 employees. This is 0.6% higher than the number as of the March 31, 2018, reporting date (51,621 employees).

Net financial debt can be broken down as follows: