Steel Division

MARKET ENVIRONMENT AND BUSINESS DEVELOPMENT

The Steel Division performed extremely positively in the first half of the business year 2023/24, although the European steel market as a whole presented a very difficult environment in this period. Above all those sectors characterized by high steel demand were particularly affected by the overall economic slowdown. These include the construction industry, the mechanical engineering industry and the white goods industry. By contrast, demand from the automotive and energy sectors—the markets on which the Steel Division has a strategic focus—was positive.

In the first six months of the business year demand from the automotive industry—the biggest market segment in the Steel Division’s portfolio—was very good. The processing of high order backlogs following the increasing resolution of supply chain problems during and after the pandemic resulted in high auto production. In addition, the Steel Division also grew through active acquisitions in the first half of the business year 2023/24 and further expanded its market shares in this segment.

Steel demand from the white goods and consumer goods industries remained weak. The boom during the COVID-19 lockdowns resulted in significantly fewer household appliances being purchased at present. The weak construction industry also contributed to the slowdown in consumer spending. However, this situation does not mean a further deterioration over time, but a continuation of the already weak demand situation.

Demand in the mechanical engineering industry began to cool off at the start of the first half of the business year 2023/24 and became even weaker in the further course of the reporting period.

The construction industry is one of the most important customers for the steel market as a whole, but comparatively only a small market segment for the Steel Division. The performance of the construction industry was already impacted by rising interest rates and financing costs at the beginning of the first half and weakened further in the course.

The energy sector is served by the heavy plate and foundry business segments. In particular a good project landscape for oil and gas pipelines led to good order intake for heavy plate and an overall positive performance in this area.

At the beginning of the business year there were price declines for the main raw materials used in steel production, such as iron ore and metallurgical coal. Prices trended sideways over the reporting period until the end of the first half of business year 2023/24 when raw material prices increased again. This was particularly true of metallurgical coal.

The general trend in steel prices on the European steel market (spot market) was characterized by falling prices throughout the first half of 2023/24, with stabilization at a low level over the summer. As the Steel Division sells its steel products exclusively via contracts and not on the spot market, prices were comparatively more stable overall. However, here too price reductions had to be realized for the shorter-term contracts in the course of the first half.

FINANCIAL KEY PERFORMANCE INDICATORS

In the previous year the Ukraine war resulted not only in sharp rises in raw material and energy costs but also in a significant increase in the price level for flat steel products. In the first half of the business year 2023/24 this trend weakened slightly on the price side, which was also reflected in the financial key performance indicators (KPI’s) of the Steel Division. As a result, revenue decreased by 9.0% to EUR 3,128.3 million in the first half of the business year 2023/24 (H 1 2022/23: EUR 3,437.5 million). By contrast, shipments increased, triggered by improved demand from the automotive industry.

Operating profit was impacted by lower sales prices and continued high costs for raw materials and energy. EBITDA decreased by 55.4% from EUR 796.3 million in the previous year to EUR 355.3 million in the current reporting period. The EBITDA margin was 11.4% in the first half of the business year 2023/24. In the first half of 2022/23, the EBITDA margin still reached 23.2%. EBIT decreased by almost two thirds in the same period from EUR 666.2 million (margin of 19.4%) to EUR 226.7 million (margin of 7.2%).

The financial key performance indicators (KPIs) developed in two ways in a quarter-on-quarter (QoQ) comparison. The seasonally lower delivery volumes in the summer quarter and the likewise somewhat weaker prices had a negative impact on revenue. It decreased by 9.7% to EUR 1,484.7 million in Q 2 2023/24 compared to Q 1 2023/24 (EUR 1,643.6 million). By contrast, EBITDA improved slightly in a direct quarter-on-quarter comparison, rising by 4.0% to EUR 181.2 million with a margin of 12.2% (Q 1 2023/24: EUR 174.2 million with a margin of 10.6%). The basis for this was the increase in gross margin as lower raw material and energy costs more than offset the lower price level.

EBIT of the Steel Division increased by 6.1% to EUR 116.7 million in Q 2 2023/24 (margin of 7.9%). In the first quarter 2023/24 the Steel Division achieved EBIT of EUR 110.0 million with a margin of 6.7%.

The number of employees (FTE) in the Steel Division was 10,748 as of September 30, 2023, an increase of 2.9% compared to the previous year with 10,446 employees.