At the start of the business year 2019/20, the Management Board of voestalpine AG came to the conclusion that the previous year’s EBITDA would likely be achievable in the current business year too, provided certain assumptions come to pass.
The key influencing variables in market and cost terms on which this assumption was based were as follows at the time:
- A cooling of the economy in the markets that are key to voestalpine, but no recessionary or crises scenarios;
- A cooling of the momentum in the automotive industry, but no new dramatic distortions in the automotive market on account of the new emissions test to be introduced in Europe in September 2019;
- No negative effects from the global trade conflicts and/or the Brexit above and beyond the anticipated cooling of the economy;
- A normalizing of iron ore prices over the course of the business year; and
- Positive dispositions of challenges internal to the company.
Where are we three months later?
Generally speaking, it can be said that the economic uncertainty has grown since the start of the business year and that negative effects from the global trade conflicts and/or the Brexit are likely to increase further.
The assumption that iron ore prices would fall has not materialized to date. So far, a situation where rising ore prices occur in tandem with falling steel prices has held sway for short periods only. This is why we expect that, this time too, the present unfavorable constellation will be resolved during the second half of the business year.
The momentum in the automotive industry is undoubtedly cooling off. This has affected the four divisions of the voestalpine Group differently in the first quarter of the business year 2019/20, with moderate to material impacts on earnings. Customers of voestalpine in the automotive industry are confident that they will be able to handle the new emissions test in September.
The intracorporate challenges are being dealt with. Hence this particular set of topics should have less of an impact on the current business year’s second half than it did on the first.
Management is counteracting the current developments through intensified programs aimed at boosting efficiency and cutting costs. First positive results of these programs should also take effect as early as in the second half of the current business year.
The Management Board of voestalpine AG continues to work in a difficult environment, particularly with respect to the development of iron ore and steel prices, on achieving EBITDA for the current business year that is comparable to that of the previous business year even though the uncertainties have mounted since the start of the current business year.