Metal Engineering Division

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

Market environment and business development

In the first quarter of 2023/24, the Metal Engineering Division still continued the excellent performance of the previous quarters relatively well. The basis for this was a high demand from the oil and natural gas industry, which was already declining at the end of the quarter, as well as stable demand from the railway infrastructure sector, which remained at a high level. Partial slowdowns, such as in the construction and mechanical engineering industries, affected customer segments that contribute to a smaller extent to the division’s overall business. The capacity utilization of the steel production in Donawitz, Austria, remained at a satisfying level under these conditions.

The economic environment in the Railway Systems business segment at the business year 2023/24 was characterized by very good demand in the rails product segment. The high demand for high-quality rails in Europe led to full utilization of rail production at the site in Donawitz, Austria. The turnout systems product segment also found favorable conditions in almost all markets during the reporting period, especially in Europe’s so called “D-A-CH” region (which comprises Germany, Austria, and Switzerland) and the Eastern and Central European countries. Brisk demand also characterized the picture in North America, especially for the transit and Class I segment. Recently, the placing of orders for turnout systems for new high-speed rail lines in China was somewhat more restrained. This was partly compensated for by spare parts deliveries for maintenance on existing high-speed rail lines. In Australia and Brazil, the capacity utilization of the production plants continued to be satisfactory. Active investments by the raw material industry were decisive for this in both countries.

The largely good performance in the Industrial Systems business segment in the first quarter of 2023/24 was due to the still pronounced, albeit currently declining, momentum in the oil and natural gas sector. The tubulars product segment benefited from deliveries of seamless steel tubes and threaded connections (Oil Country Tubular Goods, OCTG) to global oil and natural gas field equipment suppliers. The wire product segment was confronted with a contrary development of demand: Declining orders were particularly noticeable in the construction and mechanical engineering industries, but also in the consumer goods industry. Conditions in the automotive supply industry were somewhat better, although some order call-ups occurred at very short notice. Overall, the development in the welding product segment was positive thanks to the still pronounced dynamics in the energy sector. From a regional perspective, conditions in Europe proved favorable, while incoming orders in North America remained somewhat below expectations. In Asia, the revived market environment in the oil and natural gas industry supported demand for sophisticated welding solutions.

Development of the key figures

The further improvement of the Metal Engineering Division’s key financial figures in the first quarter of the business year 2023/24 is primarily attributable to two factors: In addition to a pleasing development in the Railway Systems business segment, in particular to the excellent performance of the tubulars product segment with its strong focus on the oil and natural gas industry. The welding product segment is also showing a consistently solid trend. Only wire technology’s key financial figures are below those of the previous year due to declining demand in the reporting period. Overall, the division was able to increase its revenue by 9.8% to EUR 1,144.4 million in the first quarter of 2023/24 (Q1 2022/23: EUR 1,042.2 million). This growth is the result of higher price levels at Tubulars and Railway Systems. This was also associated with a substantial expansion of margins in these segments. As a result, the Metal Engineering Division increased EBITDA in the first quarter of 2023/24 by more than half year on year to EUR 182.3 million with a margin of 15.9% (Q1 2022/23: EUR 121.2 million; margin of 11.6%). In the same period, profit from operations (EBIT) improved significantly by 79.2% to EUR 138.0 million with a margin of 12.1% (Q1 2022/23: EUR 77.0 million; margin of 7.4%).

As of June 30, 2023, the Metal Engineering Division had 14,145 employees (FTE, full time equivalent). Compared to the same date in the previous business year (13,504), this represents an increase of 4.7%. This is primarily due to the acquisition of Plastwil Sp. z o.o., which has been fully consolidated in the turnout systems product segment since August 1, 2022.