Metal Forming Division

Market environment and business development

In the business year 2019/20 to date, the Metal Forming Division has faced a dampening of sentiment in the market’s key segments and regions. Its two dominating business segments—Automotive Components as well as Tubes & Sections— were affected most by this development. Yet demand has cooled in the Precision Strip segment also. By contrast, high levels of activity continue to characterize the Warehouse & Rack Solutions business segment.

Automotive Components

The downward trend regarding component order call-offs from European plants in the Automotive Components segment has continued in the business year 2019/20 to date. While automotive sales in Europe declined only slightly in 2019 compared to the previous year, the declines in European automotive production were much more pronounced. To some extent, this development stems from increases in the outsourcing of capacities to countries outside of Europe, particularly in connection with SUVs that are in high demand. Accordingly, demand for the products of voestalpine’s plants in North America and China remained solid. This was contrasted by substantially higher start-up costs during the reporting period at the plant in Cartersville, Georgia, USA. While measures taken at this facility have boosted its efficiency in the meantime, additional optimization steps will be necessary for it to achieve initially planned targets.

Tubes & Sections

The weakening momentum worldwide in the automotive industry has also had an impact on the Tubes & Sections business segment. Reductions in inventories within the supply chain have depressed sales of safety-related components to the global supplier industry. Both the commercial vehicle and the construction machinery industry in Europe have suffered from weaker demand, whereas the business climate in the continent’s late-cycle construction industry has been stable. The U.S. market presents a more dynamic picture overall thanks, in particular, to the storage technology and aerospace industries. In Brazil, a slight recovery is taking hold, albeit from a very low level.

Precision Strip

Thanks to its good market position, the performance of the Precision Strip business segment in an environment characterized by a trend toward declining demand was satisfactory. Following a phase during which orders slowed down, this segment started to regain ground in Europe toward the end of the reporting period. The Chinese market, for its part, stabilized at a slightly lower level, but the market environment in the U.S. has become increasingly difficult due to intensifying protectionism worldwide.

Warehouse & Rack Solutions

The continued trend toward e-commerce provides for an excellent project environment in the market for high-bay warehouses and system racks. Aside from Europe, the U.S. market, where automated storage technology is becoming an increasingly important factor, offers a promising future. Following solid order levels throughout, especially in the third quarter of the business year 2019/20, developments in the Warehouse & Rack Solutions business segment indicate that capacity utilization will be excellent in the coming business quarters.

Financial key performance indicators

Year over year, the revenue of the Metal Forming Division for the first three quarters of the business year 2019/20 fell but slightly by 1.1%, from EUR 2,143.4 million to EUR 2,120.0 million. A more detailed analysis of the division’s business segments reveals the underlying dampening of economic sentiment in key segments and regions. For example, Tubes & Sections has had to contend with a substantial decline in sales due to increasingly challenging conditions, whereas Warehouse & Rack Solutions as well as Automotive Components succeeded in posting revenue growth owing to the strong growth in German automotive manufacturers’ component order call-offs for new car models being produced at their plants outside of Europe. At voestalpine’s plant in Cartersville, Georgia, USA, these complex production processes have led to significant start-up cost overruns. This made it necessary to recognize about EUR 35 million in impairment losses for the current business year’s third quarter. Given that such write-offs and/or restructuring expenses were required at other voestalpine facilities as well, EBIT for the current reporting period is affected by a total of approximately EUR 60 million in non-recurring effects; of these, about EUR 20 million also affect EBITDA. Sharply higher start-up expenses at the Cartersville site as well as non-recurring effects from provisions set up on account of external shifts in order activity already impacted earnings in the previous year. EBITDA fell by 9.7% against this backdrop, from EUR 153.8 million (margin of 7.2%) in the first three quarters of the previous business year to EUR 138.9 million (margin of 6.6%) in the same period of the business year 2019/20. At EUR –5.8 million (margin of –0.3%), EBIT for the current reporting period is negative due to the dampening of the business climate as well as the extensive non-recurring effects (previous year: EUR 65.6 million, margin of 3.1%).

The quarter-on-quarter comparison (QoQ) of the second and third quarters of the current business year shows a decline in revenue by 6.8%, from EUR 715.7 million to EUR 666.7 million. All of the Metal Forming Division’s business segments had to contend with lower numbers also due to the pronounced seasonality of business toward the year’s end. In earnings terms, the aforementioned non-recurring effects in the third quarter (about EUR 60 million based on EBIT, of which about EUR 20 million also affect EBITDA) led to a sharp reduction in the division’s performance. EBITDA dropped by more than one-third, from EUR 48.7 million (margin of 6.8%) in the second quarter of the business year 2019/20 to EUR 31.8 million (margin of 4.8%) in the third quarter. During the same period, EBIT fell from EUR 13.8 million to EUR –43.9 million, causing the EBIT margin to drop from 1.9% to –6.6%.