High Performance Metals Division

Market environment and business development

The market environment of the High Performance Metals Division in the first quarter of the current business year was substantially weaker compared to previous quarters. The COVID-19 pandemic and the resulting lockdown in all of the division’s major markets triggered a meltdown in demand which, in turn, led to stiffening competition in all of the division’s major customer segments.

Due to its relatively short-term business cycle, the toolmaking industry reacted directly and immediately to the shutdowns of customers’ businesses. Compounded by COVID-19, the significant dampening of demand stemmed, above all, from the palpable uncertainty that has gripped the automotive industry already since the previous business year. Sales of tool steel for consumer goods were affected by weak consumption. Applications in medical technology were the only areas in the tool steel segment that performed well.

The special materials product segment was confronted with massive cuts in the aerospace as well as the oil and natural gas industries. Widespread delays and cancellations affected the aerospace industry in the first quarter of the business year 2020/21. All current forecasts for this industry are based on the premise that both business and leisure air travel and hence the demand for new aircraft will decline over a longer period. Just as the aerospace industry is currently adapting its overall supply chains to this new production environment, the High Performance Metals Division is reacting to its changed market environment through capacity cutbacks.

The oil and natural gas industry is affected by both COVID-19 and low crude oil prices. Exploration activity has dropped substantially. To some extent, however, the division succeeded in benefiting from other special steel manufacturers’ temporary plant closings. In the medium term, this market is likely to return to the previously achieved demand level for technologically complex products because the exploration of new sources is becoming ever more expensive.

COVID-19 had a negative impact on developments in individual regions. While demand in the European Union, but especially from the European automotive industry, declined dramatically across the board, it mainly affected the tool steel and high-speed steel product segments. Orders in the product segment related to the production of drop-forge parts for the commercial vehicle industry also fell dramatically. The year-over-year decline in deliveries to the aerospace industry was even more pronounced.

North America presented a similar picture. Here, too, there was a massive meltdown in demand from the automotive industry. Orders from the oil and natural gas industry also plummeted. The aerospace industry saw extensive order delays. South America is also suffering dramatically from the ramifications of the COVID-19 pandemic. Demand from all industrial segments in the first business quarter was substantially lower year over year.

In China, a country that was the first to be impacted by the COVID-19 crisis, the recovery of the market environment from the shutdown has been surprisingly rapid. In the rest of Asia, however, the division has had to contend with a sharp decline in economic momentum due to the continuation of widespread measures aimed at containing the pandemic and thus a sharp decline in economic momentum.

Development of the key figures

The development of the key figures of the High Performance Metals Division also reflects the difficult economic environment. The division’s revenue dropped by 32.2%, from EUR 777.6 million in the first quarter of the business year 2019/20 to EUR 527.3 million in the reporting quarter. This decline is largely due to the substantial decrease in deliveries resulting from the COVID-19 pandemic. Intensified competition also affected pricing developments. The number of human resources was adjusted in line with the reduced utilization of production capacity. Nevertheless, the operating result (EBITDA) plummeted by 59.3% from EUR 99.2 million (margin of 12.8%) in the first quarter of the business year 2019/20 to EUR 40.4 million (margin of 7.7%) in the first quarter of the business year 2020/21. At EUR –1.5 million (margin of –0.3%), the profit from operations (EBIT) for the reporting period was slightly negative. By comparison, the division’s EBIT for the first quarter of 2019/20 was EUR 57.1 million (margin of 7.3%).

As of the close of the first quarter of the business year 2020/21, the number of employees (full-time equivalents, FTE) in the High Performance Metals Division fell by 9.8% to 12,902 (Q 1 2019/20: 14,302). This decline in staffing levels stems from the restructuring of the Group’s special steel plant in Wetzlar, Germany, as well as from overall adjustments to the massive deterioration in the economic environment.