Steel Division

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

MARKET ENVIRONMENT AND BUSINESS DEVELOPMENT

The Steel Division performed very solidly in the first three quarters of the business year 2023/24 against the backdrop of a weak European steel market overall. Good demand from the automotive and energy sectors, which are particularly important for the Steel Division, contributed to this. Demand from the construction, mechanical engineering, white goods and consumer goods industries remained subdued. This development was also reflected in relatively low shipment volumes at the end of the reporting period.

Demand from the automotive industry, the largest market segment in the Steel Division’s portfolio, was good in the first nine months of the business year 2023/24. This was also due to the fact that automotive manufacturers worked off the high order backlogs resulting from the supply chain problems during and after the COVID-19 pandemic. However, these order backlogs have now been reduced to a large extent. Thanks to active acquisitions and the resulting increase in market share, the automotive segment has seen above-average growth for the Steel Division.

Demand in the white goods and consumer goods industry remained weak in the first three quarters of the year. The boom during the COVID-19 lockdown and the currently weak construction industry meant that there is little demand for new white goods at the moment. The trend towards the end of the reporting period was largely stable, but at a low level.

Demand in the mechanical engineering industry has cooled off since the beginning of the business year. Momentum has become increasingly weaker over the course of the reporting period. This trend continued in the third quarter of 2023/24.

Although the construction industry is generally one of the most important customers for steel products, it is a relatively manageable market segment for the Steel Division. The construction industry began to suffer from rising interest rates very early on and has continued to weaken over the course of the business year 2023/24. In the third quarter of the current business year, the construction industry stabilized at a low level.

The energy sector, which is served by the Heavy Plate and Foundry business segments, was characterized by a good project landscape for pipelines, among other things. This led to a positive performance in this segment.

Raw material and steel prices were volatile in the first three quarters of the business year 2023/24. Prices for iron ore and metallurgical coal fell at the beginning of the business year. After a stable phase in the first two quarters, raw material prices rose again in the third quarter of 2023/24.

The falling commodity prices also had a dampening effect on steel prices on the European spot market at the beginning of the business year and essentially trended sideways until the end of the summer. In the Northern fall, the European steel industry was able to push through price increases on the spot market, which were driven in particular by higher raw material prices.

The Steel Division sells its steel products exclusively via the contract business and not on the spot market. Accordingly, the price trend was more stable overall.

DEVELOPMENT OF THE KEY FIGURES

The Steel Division reports declines in the financial key performance indicators (KPIs) for the reporting period. Revenue in the Steel Division fell by 8.9% to EUR 4,502.9 million in the first three quarters of 2023/24 (Q 1 – Q 3 of the previous year: EUR 4,941.2 million). This development reflects the decline in steel prices, which first became apparent on the spot markets and, after a delay, in the contract business. There was a slight improvement in the quantities sold. This is mainly due to the fact that the Steel Division’s most important market segment, the automotive sector, showed signs of catching up and increased demand. The fact that the price level weakened more than raw material and energy costs is reflected in EBITDA, which fell by 45.3% from EUR 936.7 million (margin of 19.0%) to EUR 512.2 million (margin of 11.4%) in the first three quarters of the business year 2023/24. The government programs to cushion the high energy costs had a positive effect in the third quarter of 2023/24. EBIT decreased by 56.9% from EUR 742.7 million (margin of 15.0%) to EUR 320.0 million (margin of 7.1%) in the reporting period.

In a comparison of the second quarter of 2023/24 with the third quarter of 2023/24, revenue fell by 7.4% from EUR 1,484.7 million to EUR 1,374.6 million. One of the reasons for this was that product prices for shorter-term contracts fell slightly. In addition, delivery volumes in the third quarter were slightly below the level of the second quarter. EBITDA fell by 13.4% in the third quarter of 2023/24, dropping from EUR 181.1 million (margin of 12.2%) to EUR 156.9 million (margin of 11.4%). The decline in sales volumes proved to be the main driver of the fall in earnings in a direct quarter-on-quarter comparison. Government subsidy programs for energy costs had a positive effect on earnings in the third quarter. EBIT fell by 20.1% from the second to the third quarter of 2023/24: specifically, from EUR 116.7 million (margin of 7.9%) to EUR 93.3 million (margin of 6.8%).

The number of employees (FTE) rose by 2.1% to 10,617 as of December 31, 2023, compared to 10,401 employees as of December 31, 2022.