High Performance Metals Division

This report is a translation of the original report in German, which is solely valid.

Market environment and business development

The High Performance Metals Division saw a substantial year-over-year improvement in its market environment during the first three quarters of the business year 2021/22 thanks to an upward trend that included all key industrial segments but impacted each in different ways. While most of the increases in the cost of raw materials were largely passed on to customers, the division had to absorb some of the exorbitant energy price increases in the Northern fall of 2021. Its ability to pass on higher energy costs was limited, especially in connection with exports to Asia and North America, because the prices for electricity and natural gas in Europe exceeded prices in these sales regions by far.

Tool Steel
Despite the production curtailments in the automotive industry due to the chip shortage, orders for tool steel remained at a good level during the reporting period. This was also due to the fact that the momentum in the consumer goods industry, which is the second-largest driver of demand, was very solid.

Special Materials
Following its meltdown a year earlier on account of the spreading COVID-19 pandemic, the aerospace industry has seen an uninterrupted upward trend throughout the current business year. The need for short-haul aircraft is rising because, in certain respects, regional air traffic has already returned to pre-pandemic levels; as far as transatlantic air traffic is concerned, however, this is not expected to occur until calendar years 2024/25 at the earliest. Hence the aerospace industry seems to have bottomed out as much as the oil & natural gas sector, where investment activity already picked up at the start of the business year 2021/22. The number of new offshore project launches requiring more sophisticated special materials has been growing as well.

The HPM Production segment used the sharp increase in orders during the current business year to date to improve capacity utilization in all key production plants. Investments in technological innovation also proceeded apace. Work on the main facilities of the division’s biggest construction project—the new special steel plant in Kapfenberg, Austria—was largely completed at the end of calendar year 2021. As planned, the commissioning of the plant is slated for mid-2022.

Strong demand for the tool steel product segment of the Value Added Services business segment turned out to be the main driver of the latter’s good performance in the reporting period. Sales of services such as heat treatment and coating were highly satisfactory as well.

Regional Development

Europe

The High Performance Metals Division saw a significant upward trend in Europe during the first three quarters of the business year 2021/22. Rising investments in the automotive industry triggered good demand especially for tool steel. Demand for special materials used in the aerospace industry as well as in the oil & natural gas sector also improved in part.

North America

In North America, sales of tools for the automotive industry rebounded, too, in turn increasing demand for tool steel. The momentum in the oil & natural gas industry also improved significantly. As before, however, the 25% tariffs that the United States imposed on steel products several years ago continued to have an adverse effect on imports. In this respect, a new agreement between the U.S. and Europe provides for the introduction of quotas at the start of calendar year 2022, which is expected to bring about substantial improvements in European deliveries of steel to the United States.

South America

In South America, the upward trend during the reporting period resulted from the brighter outlook in both the automotive and the mechanical engineering industries. To some extent, the High Performance Metals Division also benefited from improved conditions in the continent’s oil & natural gas industry.

Asia

While the division encountered largely positive conditions in Asia at the start of the business year 2021/22, the market environment especially in China weakened a bit during the first three business quarters. The Indian market saw a slight decline in orders during the reporting period’s third quarter.

Financial key performance indicators

Following the COVID-19-induced meltdown in the business year 2020/21, the key performance indicators (KPIs) of the High Performance Metals Division for the first three quarters of the business year 2021/22 reflect clearly positive perfor­mance. Year over year, revenue jumped almost one third to EUR 2,161.4 million (Q 1 – Q 3 2020/21: EUR 1,633.7 million). About two-thirds of this amount stem from greater delivery volumes and the remaining third from the fact that higher raw materials and energy prices were passed on to customers, resulting in higher sales prices. At EUR 269.9 million with a margin of 12.5%, EBITDA for the first three quarters of the current business year is more than double the amount posted the previous year (Q 1 – Q 3 2020/21: EUR 131.7 million, margin of 8.1%). Over and above greater delivery volumes, this improvement is also due to the implementation of measures aimed at lowering costs and boosting efficiency. Yet sharp increases in the costs of both raw materials and energy offset favorable developments in pricing. EBIT for the first three quarters of the business year 2021/22 multiplied year over year to EUR 151.0 million with a margin of 7.0% (Q 1 – Q 3 2020/21: EUR 8.5 million, margin of 0.5%).

The quarter-on-quarter (QoQ) comparison of the second and third quarters of the current business year shows that, in the third quarter, revenue rose slightly by 2.0% to EUR 735.9 million (Q 2 2021/22: EUR 721.3 million). While the delivery volume declined a little bit, sales prices rose a bit in the third business quarter. The most recent, exorbitant increases in electricity and natural gas costs at the division’s European production plants caused EBITDA to fall 13.4% in the third business quarter to EUR 78.3 million with a margin of 10.6% (Q 2 2021/22: EUR 90.4 million, margin of 12.5%). EBIT for the third quarter fell 22.9% to EUR 39.0 million with a margin of 5.3%, down from EUR 50.6 million (margin of 7.0%) in the second quarter.