Report on the financial key performance
indicators of the voestalpine Group

Non-recurring effects comprising primarily impairment losses as well as, to a smaller extent, provisions for restructuring expenses and other risks have had a significant impact on the Group’s financial key performance indicators (KPIs) for the third quarter as well as the first nine months of the business year 2019/20. These non-recurring effects represent the impact of the analysis announced in the semi-annual report for the business year 2019/20 of the changes in the global economic order on voestalpine’s key business segments.

About EUR 75 million in non-recurring effects adversely affect EBITDA for the third quarter and the first nine months of the business year 2019/20; the impact on EBIT (including the EBITDA effects) amounts to about EUR 345 million.

Non-recurring effects also impacted the figures for the same period of the previous year—i.e. the first nine months of the business year 2018/19. These effects arose from the delayed start-up of the automotive component plant in Cartersville, Georgia, USA, as well as from the need to set up provisions in connection with an investigation by the German Federal Cartel Office (Bundeskartellamt) against steel producers on suspicion of past anti-competitive practices in the heavy plate product segment. The scheduled overhaul of the Steel Division’s largest blast furnace impacted the Group’s performance for the business year 2018/19 as well.

Against this backdrop, any comparison of the KPIs pursuant to IFRS is of limited relevance to descriptions of the company’s operating performance.

The voestalpine Group generated revenue of EUR 9,575.2 million during the first nine months of the business year 2019/20, which equates to a decline of 3.8% compared to the previous year’s revenue of EUR 9,948.6 million. All four divisions were affected by this development, albeit to different degrees. Weak demand, especially in Europe, resulted in lower delivery volumes. On the earnings side, EBITDA dropped by 24.2%, from EUR 1,104.1 million in the first three quarters of the business year 2018/19 to EUR 837.2 million in the same period of the current business year. Aside from the aforementioned non-recurring effects, lower production volumes and deliveries led to a reduction in the funds available for covering fixed costs. In the Steel Division, furthermore, sales prices came under pressure, in turn eroding margins on account of sustained highs in prices for raw materials, especially iron ore. This historically unfavorable price/cost scenario is but one outcome of the record steel production in China. As the world’s largest steel producer, China determines the world’s iron ore markets, with the result that prices have not responded to weaker market conditions in Europe and North America. Besides the challenging economic environment, EBIT was also impacted by impairment losses in the third quarter of the business year 2019/20 which, in the final analysis, resulted in negative EBIT of EUR –82.3 million in absolute terms. In the same period of the previous business year, the voestalpine Group generated EBIT of EUR 525.5 million.

In keeping with EBIT, the Group’s profit before tax for the first nine months of the current business year is negative as well: EUR –185.2 million (previous year: EUR 430.6 million). Given the negative earnings, at EUR 25.2 million the corporate income tax is positive. This results in a profit after tax of EUR –160.0 million.

Aside from the Group’s earnings performance, accounting measures also had a significant impact on the development of the gearing ratio (net financial debt as a percentage of equity). For one, the EUR 500 million hybrid bond issued in 2013 was repaid as of October 31, 2019. It was recognized in equity as of September 9, 2019, and refinanced through borrowings. For another, the increase in net financial debt stems from the recognition of EUR 437 million in leases pursuant to IFRS 16. As of December 31, 2019, net financial debt stood at EUR 4,554.7 million, which equates to an increase of 20.3% over the previous year (December 31, 2018: EUR 3,785.7 million). Relative to the amount recognized as of the March 31, 2019, reporting date (EUR 3,125.4 million), this corresponds to an increase of 45.7%. Equity declined year over year by 12.1%, from EUR 6,478.0 million as of December 31, 2018, to EUR 5,693.2 million as of December 31, 2019. Compared with the March 31, 2019, reporting date (EUR 6,709.8 million), equity fell by 15.2%. Given these developments, as of December 31, 2019, the gearing ratio is 80.0%, which represents a substantial increase over both the previous year’s figure (58.4%) and the figure as of the March 31, 2019, reporting date (46.6%).

As of December 31, 2019, the voestalpine Group had 49,838 employees (FTE), a decrease of 3.2% from the previous year’s level (51,472 employees). This is 4.0% lower than the number as of the March 31, 2019, reporting date (51,907 employees).

Net financial debt can be broken down as follows: