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 delivered excellent performance in the first half of the business year 2022/23. It profited from the very favorable economic environment, particularly in the business year’s first quarter. In addition to the usual seasonal declines during the second business quarter (which coincides with the Northern summer), weakening trends also began to make themselves felt in individual customer segments as time wore on. The division was unable to pass on all of the continuing sharp increases in European energy costs to its customers in all segments. Implementing price increases to offset the high cost of electricity and natural gas posed a challenge, especially in connection with exports to non-European markets and in connection with products whose competitive differentiation is negligible.

      Tool Steel

      During the first six months of the business year 2022/23, demand from the automotive industry was largely in keeping with the levels seen in the previous year. The positive environment was driven mainly by the development of new models, particularly in the field of e-mobility, in both Europe and North America. Yet demand from the automotive industry in Europe dropped off slightly toward the end of the reporting period. Exports to the United States were affected not just by the adverse effects of high energy costs in Europe, but also by positive effects. This is because voestalpine’s European plants benefited from the changes in the EUR/USD exchange rate. Moreover, the rollback of the “punitive tariffs”—the general tariff of 25% was replaced by a quota system—substantially eased steel imports into the U.S.

      Sales in the consumer goods industry, a major customer segment of the High Performance Metals Division in Asia, suffered on account of the Chinese government’s zero-COVID strategy. Resulting lockdowns triggered extensive industrial production shutdowns in the affected regions. The division was able to pass on the higher energy costs it incurred in Europe to its customers in Asia only to a limited degree, because Asian competitors did not have to contend with such significant cost increases.

      Special Materials

      The clearly positive trend in the industrial aerospace segment continued unabated over the first half of the business year 2022/23. This upswing is driven by the increase in single aisle aircraft build rates due to the passenger growth in regional air traffic as well as by replacement investments in new and more efficient aircraft models. Demand for long-haul aircraft, however, has not yet returned to pre-crisis levels. The economic rebound in the oil and natural gas sector also continued unabated throughout the reporting period. High demand for energy substantially boosted investment activity. In both Europe and North America, orders from the aerospace and the energy sectors were highly satisfactory. In South America, too, conditions in the oil and natural gas industry improved greatly during the first half of the business year 2022/23 compared with the previous year. Demand from the wind energy segment, however, still did not take off because the long approval processes and rising construction costs lead to much uncertainty in this area.

      High Performance Metals Production

      The High Performance Metals Production business segment had to contend with substantial increases in the cost of energy and alloys during the first half of the business year 2022/23. At its production facilities, this led to a shift in the product mix toward products potentially offering greater competitive differentiation. Yet there were stark differences in the cost of energy even within Europe. For example, the production plant in Hagfors (Sweden) benefited from fairly solid supplies of natural gas and electricity and thus from much lower cost increases than the segment’s production facilities in Kapfenberg (Austria) and Wetzlar (Germany). While capacity utilization at the production plants was good overall during the reporting period, the improvements in the product mix led to slight reductions in the production volume. The implementation of the new special steel plant project in Kapfenberg is in its final phase. Production is expected to begin before the current business year is out.

      Value-Added Services

      The division’s service centers, which focus on the toolmaking industry worldwide, also profited from strong demand in the tool steel product segment. In Europe, demand for tool steel and services such as mechanical processing, heat treatments, and surface coatings was satisfactory throughout the reporting period. In North America, the Value-Added Services business segment succeeded in leveraging the partially improved economic environment arising from the change in foreign exchange rates and the rollback of the protectionist tariffs into solid performance. But high energy costs in Europe had a negative impact on its exports. In China, the sales facilities of the High Performance Metals Division had to contend with slowing momentum on account of the strict COVID-19 measures.

      Financial key performance indicators

      Quarterly development of the High Performance Metals Division

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      The financial key performance indicators (KPIs) of the High Performance Metals Division for the first half of the business year 2022/23 reflect its solid economic environment. In particular, the division’s revenue growth clearly underscores the strong momentum that its pricing policies generated. Although product deliveries were down almost 10% year over year, the division succeeded nonetheless in boosting revenue by 31.9%, from EUR 1,425.5 million in H1 2021/22 to EUR 1,879.6 million in H1 2022/23. The higher average increase in the price of both tool steel and special materials is, however, also due to the improved product mix. The reporting period clearly shows that the High Performance Metals Division succeeded not only in offsetting the sharply rising cost of alloys, but largely also in pushing its pricing policies despite the significant energy cost increases. Against this backdrop, EBITDA jumped 28.8% year over year, from EUR 191.6 million to EUR 246.8 million. The EBITDA margin declined, however, from 13.4% a year earlier to 13.1% in the reporting period. At EUR –3.5 million (margin of –0.2%), EBIT for H1 2022/23 is slightly negative, down from EUR 112.0 million (margin of 7.9%) in H1 2021/22. Impairment losses of EUR 173 million negatively affected EBIT in the reporting period. Of these impairment losses, EUR 54 million concern assets of Buderus Edelstahl (Wetzlar, Germany) and EUR 119 million the impairment of the goodwill of the HPM Production cash-generating unit (CGU).

      The financial KPIs of the High Performance Metal Division weakened a bit quarter on quarter (QoQ). Revenue declined by 4.0%, from EUR 958.8 million in Q1 2022/23 to EUR 920.8 million in Q2. While delivery volumes in Q2 were slightly lower QoQ, the division succeeded in continually raising its average prices. As far as earnings are concerned, the division’s performance in Q2 of the reporting period also fell short of its performance in Q1 2022/23, largely due to seasonal effects, but also on account of higher energy costs. On the whole, EBITDA fell by 31.0% quarter on quarter, from EUR 146.0 million (margin of 15.2%) in Q1 2022/23 to EUR 100.8 million (margin of 10.9%) in Q2. The impairment losses of EUR 173 million already mentioned in the year-over-year comparison adversely affected EBIT for Q2 2022/23. Accordingly, EBIT for the reporting period’s second quarter is EUR –111.2 million (margin of –12.1%), down from EUR 107.7 million (margin of 11.2%) for the first.

      Owing to the improved economic environment, as of September 30, 2022, the number of employees (FTE) in the High Performance Metals Division rose from 12,891 a year earlier by 4.6% to 13,479 in the reporting period.