Market environment and business development

      Thanks to its best performance ever since it was founded, the Metal Engineering Division delivered yet another significant growth spurt in the business year 2022/23, following on from the success of the previous year, which had already seen a return to the level prevailing before the outbreak of the COVID-19 pandemic. The customarily solid market environment for the Railway Systems business segment contributed to this result. Yet it was the Industrial Systems business segment, which prospered due to excellent demand from the oil and natural gas industry, that drove the division’s outstanding performance. The worldwide boom in the exploration of fossil fuels was driven not only by the backlog of investment projects resulting from the COVID-19 pandemic; the distortions resulting from the Ukraine war led to an overall realignment of international oil and natural gas deliveries also.

      As the global leader in systems solutions for railway infrastructure, the Railway Systems business segment’s highly satisfactory performance continued unabated in the business year 2022/23. Ongoing maintenance work on the railway infrastructure has been key to the segment’s good capacity utilization. Moreover, demand has stabilized owing to the broad focus of Railway Systems—both as a global company specialized in rail technology and a one-stop-shop (OSS) provider of fully integrated rail technology infrastructure solutions—on all types of rail traffic, ranging from mixed, freight, and local mass transit systems all the way to high-speed rail lines. In the fourth quarter of 2022/23, Railway Systems also succeeded in securing its largest-ever individual contract to date: the new “High Speed 2” in Great Britain.

      Orders from the European core markets (Germany, Austria, and Switzerland) in the rails product segment were good throughout the reporting period. In addition, the implementation of projects in Central and Eastern European countries further contributed to excellent capacity utilization at the rail factory in Donawitz, Austria. Deliveries to overseas regions such as Australia and Brazil were slightly weaker compared to the previous year. Despite robust demand overall, the sharp increases in energy costs started to become a challenge for longer-term project contracts. As the business year wore on, however, the segment became ever more successful in including higher electricity and natural gas costs in pricing agreements. Energy prices eased somewhat in the fourth quarter of the reporting period.

      The turnout systems product segment specializes in the production of turnout system solutions for the most stringent requirements. This segment’s own rail production makes customized quality grades and sections available as pre-materials. A worldwide network of local production capacities ensures optimal customer service. As far as demand is concerned, in the business year 2022/23 the turnout systems product segment benefited from strong momentum in Europe’s German-speaking region (Germany, Austria, Switzerland). Satisfactory volume effects ensured high capacity utilization at the segment’s Central and Eastern European facilities. In North America, demand from the Class I segment of the largest freight railroads in the United States was largely stable, whereas demand in Mexico declined slightly. Mine operators’ ongoing strong investment activity in Australia and Brazil had a positive impact on capacity utilization at the local production plants in these regions. Contract awards in India were also very strong. Conditions in China, however, were more complex. Project delays led to volatility in connection with the delivery of turnout systems for high-speed rail lines. As before, the political situation in South Africa was an impediment to more favorable developments in the railway infrastructure sector.

      In addition to drive and locking systems for turnouts, the signaling technology product segment also supplies diagnostic and alarm systems for fixed assets and rolling stock. With low life cycle costs, these solutions provide high availability and reliability in rail services for travelers and freight forwarders. While the signaling product segment relied on solid demand in its European core markets during the business year 2022/23, its ability to continue expanding its business activities to export markets outside of Europe was more limited.

      Strong momentum in the oil and natural gas industry accounted primarily for the excellent performance of the Industrial Systems business segment in the reporting period. The tubulars product segment (seamless tubes), in particular, benefited substantially from this development. It supplies high-grade seamless steel tubes as well as threaded connections chiefly to global oil and natural gas field equipment suppliers in connection with their exploration and production activities. Catch-up investments in the wake of the COVID-19 pandemic against the backdrop of high oil and natural gas prices, as well as supply side distortions in connection with the Ukraine war, led to extensive drilling activity. This is shown by the high rig counts. This indicator comprises all active drilling fields and thus serves as the main barometer of business activity in the oil and natural gas sector. In this market environment the tubulars segment substantially expanded its production and delivery volumes. In the United States (its most important sales market for seamless tubes), tubulars benefited moreover from the rollback of the protectionist tariffs. In January 2022, the general 25% duty on steel imports transitioned to a quota system.

      The welding product segment, which provides welding solutions for high-end customer segments such as the oil and natural gas sector, the metal industry, and the automotive industry, also made the most of the strong momentum in the energy sector in the business year 2022/23. Both Europe and South America provided a friendly market environment, especially early in the reporting period. As time wore on, however, orders from these regions flattened out somewhat. While capacity relocation from one US plant to other production facilities led to one-time expenses, this will enable more efficient use of resources going forward. The welding product segment in South America and India benefited from strong momentum throughout business year ended. In China, orders were subdued at the start of business year 2022/23 owing to the COVID-19 lockdowns but improved thereafter.

      Orders in the wire technology product segment followed a downward trend over the course of the reporting period. As a flexible and innovative partner, wire technology provides a wide range of customized wire solutions particularly to the European automotive supplier industry. The segment’s customers also include the construction and mechanical engineering industries, the oil and natural gas industry as well as the consumer goods industry. Automotive industry orders for wire products steadily weakened throughout the business year 2022/23 due to the continuing semiconductor supply chain difficulties affecting the original equipment manufacturers (OEMs), as well as inventory adjustments within the value chain. Bookings from the mechanical engineering and consumer goods industry also fell during the second half of the business year. Demand from the oil and natural gas sector, however, was very satisfactory.

      The degree of fluctuation in stock prices and currency exchange rates or in prices of consumer goods in comparison to the market.