Metal Forming Division

Market environment and business development

The Metal Forming Division was confronted with a volatile market environment in the first half of the business year 2020/21. Following extremely difficult conditions at the start of the current business year owing to the spread of the COVID-19 pandemic, demand gradually improved in the division’s major customer segments. Employees at many of its European sites were registered for short time work in response to the meltdown in demand. In light of the unfavorable economic parameters, the division focused on measures to decrease costs and increase efficiency.

The comprehensive lockdowns in connection with the COVID-19 pandemic triggered revenue meltdowns in the Automotive Components business segment. From the middle of March 2020, auto manufacturers in Europe shut down production for several weeks. From the end of April through mid-May, the production plants were started up again and capacities were raised on a continuous basis. Excepting the seasonal shutdowns over the Northern summer, the production rates in European automotive plants and thus those of the automotive supplier industry continued to rise in the business year’s second quarter. By focusing on the premium segment, the production facilities of the Automotive Components business segment profited from a quicker recovery.

voestalpine’s automotive component plants in North America were exposed to developments mirroring those in Europe. Here, too, the original equipment manufacturers (OEMs) shut down production across the board at roughly the same time. The stoppages at the Metal Forming Division’s automotive customers lasted a while longer, but some of the ramp-up curves were steeper. Supply chain difficulties were a key reason for the extended shutdowns among OEMs. In China, the COVID-19 pandemic had spread several weeks earlier than elsewhere. Hence the meltdown in demand had already affected the Automotive Components business segment in the fourth quarter of the business year 2019/20. Demand for passenger cars, however, recovered much sooner than other areas. Capacity utilization at voestalpine’s plants in China thus had returned to a good level by the start of the current business year.

While the Tubes & Sections business segment was confronted with an equally challenging market environment at the start of the business year 2020/21, it too recovered steadily over the course of the reporting period. The rebound curve for deliveries of security-related tube components used in the automotive industry was a bit flatter compared to that for Automotive Components. This is mainly due to the fact that these products are shipped to the global automotive supplier industry and that this sector’s recovery was delayed somewhat on account of inventory levels. Orders for components from the commercial vehicle industry improved as well during the business year’s first half. The production facilities of Tubes & Sections benefited from the solar industry’s growing orders among others. Orders related to sections for storage systems remained positive throughout the reporting period. In regional terms, Great Britain was confronted with a dramatic decline in orders at the start of the current business year, but the economic environment improved over time. Conditions in Brazil, the largest country in South America, were similar but brightened incrementally despite high infection rates. The boom in storage technology chiefly drove the good capacity utilization at the Metal Forming Division’s plants in the United States, in effect offsetting the dramatic decline in component orders from the aerospace industry.

While the performance of the Precision Strip business segment in the first half of the business year 2020/21 followed a flatter trend compared with previous years, it was satisfactory on the whole. Order levels were good during the reporting period; orders particularly from the packaging industry also improved toward its end. Component orders in North America were positive over all, despite the highly volatile environment. China saw a slight rebound as early as in the first business quarter, whereas the economic climate in Europe brightened a little bit only in the subsequent quarter.

The Warehouse & Rack Solutions business segment not only continued to rack up excellent numbers just as it had in the previous years, it actually booked record orders in the business year’s first quarter. This ensures good capacity utilization at the division’s sites through the end of the business year. Additional projects are nearing completion. While Europe is its main market, the segment is increasingly expanding into the North American market also. The global spread of COVID-19 has continued to accelerate the trend toward online shopping and hence the need for efficient storage systems.

Financial key performance indicators

The financial key performance indicators (KPIs) of the Metal Forming Division show that the numbers for the reporting period are substantially lower due to the dampening of economic sentiment in connection with the COVID-19 pandemic. Over all, revenue fell by 24.8% to EUR 1,092.5 million in the first half of the business year 2020/21, down from EUR 1,453.3 million in the first half of the business year 2019/20. The Automotive Components business segment recorded the largest minus owing to automakers’ weeks-long production shutdowns in both Europe and the United States. Dramatic drops in revenue also hammered two other business segments, Tubes & Sections and Precision Strip. The earnings performance of the division’s individual business segments was similar. But substantial cost measures as well as public support in connection with the state-sponsored short time work programs stabilized the situation in the extremely challenging environment. While the business segments’ operating results (EBITDA) shrank as a result, the declines remained modest. Warehouse & Rack Solutions, which delivered stable EBITDA performance in an environment marked by downturns, was the exception. Against this backdrop and at negative 25.2%, the reduction in EBITDA for the first half of the business year 2020/21 to EUR 80.1 million was moderate (first half of the business year 2019/20: EUR 107.1 million). Because the declines in both revenue and EBITDA are almost identical, the EBITDA margin of 7.3% for the reporting period is more or less the same as in the previous year (7.4%). The profit from operations (EBIT) plunged by 74.0% to EUR 9.9 million (margin of 0.9%) year over year, down from EUR 38.1 million (margin of 2.6%) in the same period the previous year.

However, the quarter-on-quarter comparison (QoQ) between the first and second quarters of the business year 2020/21 shows that the Metal Forming Division achieved massive increases in its KPIs. The comparison clearly highlights the rebound of the division’s two larger business segments (Tubes & Sections and Automotive Components) in major customer segments, as manifested in the 39.6% revenue jump, from EUR 456.0 million in the current business year’s first quarter to EUR 636.5 million in the second. EBITDA climbed from a low level during the same period, from EUR 14.6 million (margin of 3.2%) to EUR 65.5 million (margin of 10.3%). While EBIT at EUR –20.7 million (margin of –4.5%) was still negative for the first quarter, it turned around substantially in the subsequent quarter, reaching EUR 30.6 million (margin of 4.8%).

The change in the number of the Metal Forming Division’s employees reflects the steps that had to be taken with respect to personnel in this challenging environment. As of September 30, 2020, the number of employees (FTE) fell to 11,443 and thus was 8.4% lower than the previous year’s figure of 12,486. This is 1.6% lower than the number as of the March 31, 2020, reporting date (11,633 employees).