Impairment losses and reversals of impairment losses

The general descriptions of plans and models—as specified in Note 11, Impairment losses and reversal of impairment losses, of the Annual Report 2021/22—still apply.

Impairment tests of cash generating units or groups of cash generating units containing goodwill

In the first half of 2022/23, impairment of goodwill in the amount of EUR 119.3 million was recognized in the High Performance Metals Division at the HPM Production unit, to which the goodwill is allocated and which produces sophisticated stainless steels. The impairment was recorded in other operating expenses as of September 30, 2022. The impairment resulted from a planning update due to the significant increase in the discount rate (WACC), which is the basis for the impairment test. The recoverable amount (value in use) of this unit was EUR 2,228.2 million as of September 30, 2022. The fifth plan year was used to calculate the perpetual annuity. The perpetual annuity was expected to grow at a rate of 1.63% as of September 30, 2022 (2021/22: 1.65%). The after-tax WACC was 8.54% (2021/22: 7.52%); the pre-tax WACC was 11.05% (2021/22: 9.64%).

The discount rate and the cash flows are the most important forward-looking assumptions. There is the risk that any change in these assumptions will necessitate a material adjustment of the carrying amounts in the future. Any increase in the after-tax discount rate by one percentage point or any decrease in the cash flows by 10% or 20% would trigger the following reductions in the carrying amounts:

The carrying amount of the goodwill-bearing Precision Strip unit would still be covered if the key forward-looking assumptions were adjusted (discount rate +1% point and cash flow –10%). A cash flow discount of 20% would result in an impairment loss of EUR 25.5 million.

Impairment test of cash generating units that have no goodwill and of other assets

In the first half of 2022/23, impairment losses of EUR 54.1 million were recognized in other operating expenses in the High Performance Metals Division at the cash generating unit Buderus Edelstahl ohne Schmiede (consisting of the steel mill, rolling lines, and drop forge sub-divisions), which is devoted to the production of drop forged parts, semi-finished products, and hot-rolled and cold-rolled steel. The impairment loss resulted from the increase in the discount rate (WACC) and from high energy costs. Due to the products’ low competitive differentiation, these increases can be passed on to the market only to a limited extent, thus leading to the loss of market share. The recoverable amount (value in use) for this unit was EUR 148.5 million. An after-tax discount rate of 7.91% (2021/22: 6.90%) was applied; the pre-tax WACC was 10.85% (2021/22: 9.44%).

As the lower limit for any further impairment is the fair value less costs to sell (individual sale proceeds), any change to the key forward-looking assumptions such as discount rates and cash flows that is considered possible would not lead to any further material impairment.

As of September 30, 2022, no further impairment losses were recognized for units to which goodwill is allocated, for cash generating units that have no goodwill, or for other assets. For all other disclosures related to cash generating units that have no goodwill, please see the Consolidated Financial Statements as of March 31, 2022.