High Performance Metals Division

MARKET ENVIRONMENT AND BUSINESS DEVELOPMENT

The High Performance Metals Division was confronted with very contrasting trends in the areas of tool steel and special materials in the first half of the business year 2023/24. While demand for special materials increased—driven by the positive development in the aerospace and energy segment—demand for tool steel slowed sharply.

The weak economy hit the tool industry worldwide in the second quarter of the business year 2023/24. The European market was particularly affected by this development. Against this background, the High Performance Metals Division recorded significant declines in volumes sold.

Tool steel

In Europe, weak demand was recorded from virtually all customer segments in the toolmaking sector. In particular, sales were impacted by high price pressure from Chinese imports in the standard grade area. High-quality grades were less affected by this trend. North America also saw a slightly weaker performance due to the general economic slowdown. In South America, performance remained largely stable, although here a recent flattening of the economy was visible.

In the Asian region, demand was subdued overall. The Chinese market weakened, particularly in the consumer goods and household appliances sectors, which are of particular importance to the division. This was triggered by problems in the Chinese real estate market and weak construction activity. Although the Chinese central government took measures to get the situation under control, there was no reversal of the trend in the reporting period.

Special materials

In the aerospace industry, the positive trend continued in the first half of the business year 2023/24. The increase in travel following the global COVID-19 pandemic resulted in a further rise in orders for aircraft. In some cases, the supply industry had difficulties in meeting the strong increase in demand from aircraft manufacturers, as the current demand dynamics exceed their capacities.

Demand also remained good in the energy segment. High energy prices supported investments worldwide to develop new sources of oil and gas. The development of liquefied natural gas (LNG) infrastructure also boosted demand for special materials. The wind energy segment continued to perform positively. In the truck sector, demand reached a record level in the first half of the business year 2023/24.

High Performance Metals Production

While production plants were still well utilized in the first quarter of the business year 2023/24, capacity utilization fell significantly in the second quarter due to weak demand for tool steel. Over the summer of 2023, production shutdowns at all specialty steel plants were used for maintenance work.

The impact of high energy costs varied from site to site. The high energy prices in Austria and Germany were particularly noticeable, but eased somewhat in the course of the first half of the current business year.

Value added services

The very subdued demand for tool steel was also felt by the division’s service centers. The division’s global distribution network recorded weaker sales volumes, particularly in Europe and, in turn, in Germany. The North American and Asian markets also weakened, although not to the same extent as Europe.

By contrast, growth was achieved in services. These include machining, heat treatment and surface coating.

FINANCIAL KEY PERFORMANCE INDICATORS

There were downward trends in the financial key performance indicators (KPI’s) of the High Performance Metals Division—both in a yearly and quarterly comparison. For example, revenues in the first half of the business year 2023/2024 decreased by 4.9% to EUR 1,787.7 million. In H 1 2022/23, revenue was still at EUR 1,879.6 million. The lower revenue is mainly the result of lower sales volumes. By contrast, the average price level for tool steel and special materials in the first half 2023/24 was slightly higher than in the reference period.

Nevertheless, gross margin declined year-on-year as a result of high expenditures, especially for raw materials and energies, and together with lower shipments it had an unfavorable impact on operating profit in the first half of the business year 2023/24. As a result, EBITDA decreased by 42.0% to EUR 143.2 million with a margin of 8.0% (H 1 2022/23: EUR 246.8 million with a margin of 13.1%).

EBIT turned year-on-year from EUR –3.5 million (margin –0.2%) to EUR 59.0 million (margin of 3.3%). However, EBIT in H 1 2022/23 included impairment charges of EUR 173 million.

In a quarter-on-quarter (Q-o-Q) comparison, the slightly lower volumes over the summer had an adverse impact on revenue. It decreased by 8.7% to EUR 853.3 million in Q 2 2023/24 (Q 1 2023/24: EUR 934.4 million). EBITDA halved in Q 2 2023/24, falling from EUR 96.4 million (margin of 10.3%) to EUR 46.8 million (margin of 5.5%). There were several reasons for this development: For one, delivery volumes were down quarter-on-quarter. In addition, selling prices were somewhat weaker in the second quarter of the business year 2023/24, starting from a high level. At the same time, raw material and energy costs remained high.

The number of employees (FTE) in the reporting period remained virtually unchanged from the previous year at 13,492 as of September 30, 2023 (13,479 employees as of September 30, 2022).