Report on the financial key performance indicators of the voestalpine Group

The revenue of the voestalpine Group rose by 5.2% in the first three quarters of the business year 2018/19 to EUR 9,948.6 million (previous year: EUR 9,460.4 million). All four divisions posted revenue growth. While the increases in the Steel Division and the Metal Engineering Division stem for the most part from higher prices occurring concurrently with slightly lower delivery volumes, the High Performance Metals Division benefitted not just from higher prices resulting from developments related to raw materials (alloys in particular), but also from a slight increase in deliveries. The growth of revenue in the Steel Division, however, results first and foremost from an improved product mix in the Heavy Plate business segment which, in turn, stems from deliveries of high-quality products to the oil and natural gas industry. However, the fact that the quantity structure of the Steel Division did not perform as well year over year is due mainly to the complete overhaul of the most important blast furnace at the Group’s Linz site in Austria, which took three and one half months. While the division largely succeeded in cushioning the resulting volume losses on the metallurgy side through pre-production as well as purchases from third parties of semi-finished products for the downstream rolling facilities, the division’s deliveries in the first three quarters of the business year 2018/19 dropped by about 10% year over year for reasons related to logistics and production technology. The expansion of the Group’s international activities in the Automotive Components business segment, which continues unabated, along with our ability to pass on pre-material price increases, were the main reasons for the revenue growth in the Metal Forming Division.

As far as earnings are concerned, the voestalpine Group had to contend with substantial losses in the current business year, which must be attributed less to a dampening of economic sentiment and more to negative one-time and non-recurring effects in two of the four divisions. Hence the results of the Steel Division, particularly in the second business quarter, were strongly impacted by the aforementioned unavailability of the Group’s largest blast furnace. In addition, the recognition of provisions in the third business quarter for the Heavy Plate segment in connection with a pending investigation by the German Federal Cartel Office (Bundeskartellamt) was yet another material factor in the decline in earnings (EBITDA) by one third. Significantly higher-than-planned start-up costs at the automotive site in Cartersville, Georgia, USA, as well as associated provisions related to external shifts in order activity lowered the EBITDA of the Metal Forming Division (cumulatively) by one third, too. The two other divisions, by contrast—High Performance Metals and Metal Engineering—delivered largely stable EBITDA performance year over year. In sum, therefore, the operating result (EBITDA) for the first three quarters of the business year 2018/19 dropped by 21.4%, from EUR 1,405.5 million (margin of 14.9%) in the previous year to EUR 1,104.1 million (margin of 11.1%) in the current year. The profit from operations (EBIT) dropped in the same period by 37.0%, from EUR 834.6 million (margin of 8.8%) to EUR 525.5 million (margin of 5.3%). Here, too, the negative effects relative to the previous year were attributable in toto to the Steel and Metal Forming Divisions, whereas the High Performance Metals and Metal Engineering Divisions remained stable. Considered in absolute terms, the profit before tax declined to an extent echoing EBIT, specifically, by 41.6% from EUR 737.1 million to EUR 430.6 million. Due to a substantial increase in the tax rate—resulting, among other things, from the fact that expenses for the provisions related to the suspicion that the Heavy Plate segment engaged in anti-competitive practices under German competition law are not tax deductible—year over year, the profit before tax even dropped by one half, specifically, from EUR 555.9 million in the previous year to EUR 275.7 million in the first nine months of the current business year.

Equity improved nonetheless in the past 12 months, from EUR 6,303.4 million as of March 31, 2017, to EUR 6,478.0 million as of December 31, 2018. But there was a slight decline in equity compared with the March 31, 2018, reporting date (EUR 6,554.3 million). By contrast, net financial debt rose from EUR 3,370.1 million as of December 31, 2017, to EUR 3,785.7 million as of December 31, 2018. Compared to the March 31, 2018, reporting date (EUR 2,995.1 million), the increase in net financial debt was even more pronounced. The significant increase in net working capital is the material cause of the increase in net financial debt—both year over year and when compared to the reporting dates. In addition, the capital outflows from investments in intangible assets as well as property, plant and equipment during the business year 2018/19 to date substantially exceed depreciation, amortization, and impairment. Consequently, the gearing ratio (net financial debt as a percentage of equity) rose year over year from 53.5% as of December 31, 2017, to 58.4% as of December 31, 2018. The gearing ratio deteriorated even further compared with the March 31, 2018, reporting date (45.7%). For details on the shortfalls in earnings, also see the ad hoc reports dated October 24, 2018, and January 16, 2019.

Given the comprehensive optimization measures that have been launched, it is to be expected from the current vantage point particularly with respect to net working capital that the funding ratios will ease substantially yet again by the close of the current business year.

As of December 31, 2018, the voestalpine Group had 51,472 employees (FTE), an increase of about 1.6% year over year (50,658 employees). This is 0.3% lower than the number as of the March 31, 2018, reporting date (51,621 employees).