Metal Engineering Division

MARKET ENVIRONMENT AND BUSINESS DEVELOPMENT

The Metal Engineering division performed very satisfactorily in the first half of the business year 2023/24. This was based on consistently good demand from the Railway System business segment. The situation in the Industrial Systems business segment was somewhat more varied. For example, at the beginning of the business year the tubulars product segment was still characterized by overheating tendencies following the post-pandemic boom in the oil and gas industry, which dissipated in the further course of the current business year. Towards the end of the reporting period the market settled at a more moderate but still good level. By contrast, the Metal Engineering Division was confronted with a challenging situation in the wire technology product segment, where the general economic slowdown was clearly felt in many customer segments.

The Railway Systems business segment achieved good results in the first half of the business year 2023/24 in both the rails and turnout systems product segments. In the rails product segment, strong demand in the European core markets ensured full capacity utilization at the production sites. As numerous projects are currently being implemented or planned in the railway sector, solid capacity utilization is assured until the end of the business year 2023/24.

The turnout systems product segment reports stable high demand and capacity utilization from the European markets, especially from Central and Eastern Europe, for the reporting period. The market environment was also favorable in South America and Australia. The performance of major freight railroads in North America was stable. By contrast, the situation for new construction projects in China for turnout systems for the high-speed network there was somewhat subdued. On the other hand, maintenance projects for the existing high-speed network in China performed well.

The situation in the Industrial Systems business segment was mixed. The tubulars product segment recorded very high demand in the first quarter of 2023/24. This was triggered by the still very dynamic activities of the oil and gas industry due to the high global demand for energy following the COVID-19 pandemic. However, the situation eased over the Northern summer of 2023 as rig counts in the United States declined and inventories in the supply chain were reduced. Demand stabilized at a continuing good level, not least due to the renewed rise in oil prices over the summer months.

The wire technology product segment operated in a difficult economic environment. The challenging conditions in the automotive, construction and mechanical engineering industries were reflected in declining orders. By contrast, demand from the oil and gas industry, for which shaped wires for flexible oil and natural gas conveyor lines are produced, was good.

The welding product segment held up well despite the increasingly difficult market environment in the first half of the business year 2023/24. While product prices were maintained at a solid level, orders were slightly lower year-on-year in volume terms due to the economic slowdown in some sectors—particularly in Europe. While the energy (LNG, oil and natural gas) and the waste-to-energy sectors performed well in China, declines were recorded above all in the Chinese mechanical engineering sector. Driven by the oil and gas industry, the first half of the business year 2023/24 was satisfactory on the North American and Brazilian markets.

FINANCIAL KEY PERFORMANCE INDICATORS

The very satisfactory development of the Metal Engineering Division is also reflected in the financial key performance indicators (KPIs). For example, revenues of the Metal Engineering Division increased by 4.6% to EUR 2,214.7 million in H 1 2023/24 (H 1 2022/23: EUR 2,118.3 million). The Railway Systems business segment contributed significantly to this with a very solid level of shipments and an improved price level in the rails product segment. The turnout systems product segment was also able to increase its business volume. The Industrial Systems business segment recorded a heterogeneous development. While revenue in the wire technology product segment declined, the tubulars and welding product segments recorded growth.

The operating result is also very positive: EBITDA increased by 30.4% from EUR 241.8 million (margin of 11.4%) to EUR 315.3 million (margin of 14.2%) in H 1 2023/24. The development on the earnings side showed parallels with revenue: The Railway Systems business segment improved significantly. Within the Industrial Systems business segment, the tubulars product segment recorded excellent earnings development with a significant plus. The welding product segment performed stably, while the wire technology product segment reported declines in earnings.

EBIT increased by 45.3% in H 1 2023/24 from EUR 153.5 million (margin of 7.2%) in the previous year to EUR 223.0 million (margin of 10.1%).

In the quarter-on-quarter (Q-o-Q) comparison from Q 1 to Q 2 2023/24, revenue of the Metal Engineering Division decreased by 6.5% from EUR 1,144.4 million to EUR 1,070.3 million. The Railway Systems business segment showed a slight improvement. By contrast, revenue in the industrial systems segment declined across all product segments. The picture is similar in terms of operating profit (EBITDA), which fell by 27.0% from EUR 182.3 million (margin of 15.9%) in Q 1 2023/24 to EUR 133.0 million (margin of 12.4%) in Q 2. While the Railway Systems business segment was able to improve EBITDA, the Industrial Systems business segment showed a downward trend in operating profit in all product segments.

EBIT decreased by 38.4% to EUR 85.0 million with a margin of 7.9% in Q 2 2023/24 (Q 1 2023/24: EUR 138.0 million with a margin of 12.1%).

The number of employees (FTE) increased by 4.6% in H 1 2023/24 from 13,619 as of September 30, 2022 to 14,247 as of September 30, 2023 mainly due to the positive economic environment in the Railway Systems business segment.