High Performance Metals Division

Market environment and business development

For the High Performance Metals Division, the first quarter of the business year 2019/20 was characterized by the slowing momentum, which continued unabated, along with intensifying competition in most markets worldwide.

The declining momentum in both the automotive industry and the consumer goods industry affected the entire division worldwide—but particularly with respect to tool steel. By contrast, the special materials product segment continued to develop along a solid trajectory in Europe and in North America thanks to good demand from the oil and natural gas sector as well as the aerospace industry.

Rising uncertainty in the automotive sector, especially in Europe, led to declining demand from the toolmaking industry. This development affected both Italy and Spain besides Germany. In Great Britain, by contrast, the uncertainty surrounding the imminent Brexit dampened demand. Furthermore, the trade barriers set up by the world’s major economies led to the diversion of materials to Europe—the only major market that remains accessible to special steel imports—in turn further aggravating the situation in the European tool steel market.

But the division did succeed in delivering pleasing growth in Europe, specifically, in the aerospace industry. Thanks to a contract with a renowned jet engine manufacturer, the Group’s production facility in Kapfenberg, Austria, will for the first time ever also supply high-tech material for highly stress-resistant jet engine discs.

Tool steel sales for the automotive industry in North America were similarly restrained as those in Europe. The oil and natural gas sector, which is critical to the special materials product segment, by contrast, was stable at a good level. Likewise, deliveries of the division’s special materials to the US aerospace industry were stable too, despite Boeing’s production cutbacks.

In South America, the sentiment improved somewhat compared with the previous year although market developments fell far short of expectations.

In Asia—China, in particular—the High Performance Metals Division was confronted with significant declines in tool steel orders. This was due to the weakness of both the automotive and the consumer goods industry which, in turn, stemmed not least from rising uncertainty among Chinese consumers in the wake of the trade war with the United States.

Production sites of the High Performance Metals Division whose product portfolio largely focuses on tool steel faced lower capacity utilization due to these developments, whereas capacity utilization at sites focused on special materials was much better.

The decline in the activities of the Value Added Services business segment, the division’s international sales organization, also results from the downturn in demand for tool steel. Given the need to boost efficiency, the division pushes its individual marketing organizations to collaborate with each other and develops best practice solutions with the aim of rolling them out across the entire Value Added Services business segment.

Development of the key figures

While the revenue of the High Performance Metals Division in the first quarter of the business year 2019/20 was stable year over year, the division had to contend with lower earnings. The volume losses were offset by higher prices for special steel products stemming, in turn, from higher alloy costs. Therefore, at EUR 777.6 million revenue in the first quarter of the business year 2019/20 was largely consonant with the previous year’s figure of EUR 780.3 million. Both lower delivery volumes and lower capacity utilization rates in the division’s production facilities were key to the drop in EBITDA by 23.2%, from EUR 129.2 million in the first quarter of the business year 2018/19 to EUR 99.2 million in the current reporting period. The EBITDA margin fell accordingly from 16.6% to 12.8%.