D.24. Financial instruments

General information

The principal financial instruments used by the voestalpine Group consist of bank loans, bonds, borrower’s notes, trade payables, and liabilities from supplier finance arrangements. The primary purpose of the financial instruments is to fund the Group’s business activities. The Group holds various financial assets, such as trade receivables, current deposits, and non-current investments, which arise directly from its business activities.

The Group also uses derivative financial instruments. They mainly include interest rate swaps, forward exchange transactions, and commodity swaps. These derivative financial instruments serve to hedge interest rate and currency risks as well as risks from fluctuations in raw materials prices, which result from the business activities of the Group and its sources of financing.

Capital management

In addition to ensuring the availability of the liquidity necessary to support the Group’s business activities and maximizing shareholder value, the primary objective of its capital management is to ensure an adequate credit rating and a satisfactory equity ratio.

The voestalpine Group manages its capital using the net financial debt to EBITDA ratio as well as the gearing ratio – i.e., the net financial debt to equity ratio. Net financial debt consists of interest-bearing loans less financing receivables, loan receivables, securities as well as cash and cash equivalents. Equity includes non-controlling interests in Group companies.

The targeted gearing ratio is less than 50%. The net financial debt/EBITDA ratio should not exceed 2.0 – or only for a limited time, if it does. All growth measures and capital market transactions are aligned with these targets.

The two ratios developed as follows in the reporting period:

Financial risk management – Corporate finance organization

Financial risk management also includes raw material and energy risk management. Financial risk management is centrally organized in terms of policy-making power, strategy determination, and target definition. The existing policies include targets, principles, roles, and responsibilities for both Group Treasury and individual Group companies. In addition, they govern matters related to pooling; money markets; credit and securities management; currency, interest rate, liquidity, and commodity price risks; and the reporting system. Group Treasury, acting as a service center, is responsible for implementation. Three organizationally separate units are responsible for closing, processing, and recording transactions, which is ensuring that a six-eyes principle is followed. These policies, compliance with them, and conformity of the business processes with the internal control system (ICS) are additionally reviewed at regular intervals by an external auditor.

As part of the voestalpine Group’s corporate policy, financial risks are continuously monitored, quantified, and—where appropriate—hedged. The Group’s risk appetite is relatively low. The strategy aims at achieve natural hedges and reduce fluctuations in cash flows and earnings. Market risks are also hedged by means of derivative financial instruments.

To quantify interest rate risk, voestalpine AG uses the interest rate exposure as an indicator. The interest rate exposure measures the impact of a one-percentage-point change in the market rate on interest income and/or interest expense.

The implementation of a netting process aggregates and balances the Group’s foreign currency cash flows. This creates a natural hedge.

A sensitivity analysis is performed to quantify the currency risk based on a potential strengthening (weakening) of the euro relative to the other currencies by 10% as of March 31. The analysis assumes that all other influencing factors are constant.

Liquidity risk – Financing

Liquidity risk refers to the risk of being unable to fulfill payment obligations by delivering cash.

The Group’s objective in managing liquidity is to ensure that sufficient liquidity is available to meet payment obligations as they fall due – under normal and stressed conditions.

The primary instrument for controlling liquidity risk is an up-to-date knowledge of the Group-wide liquidity position and a precise liquidity planning for the next 12 months that is submitted quarterly on a revolving basis by the operating entities directly to Group Treasury of voestalpine AG. The liquidity requirement derived from this liquidity plan comprises the scheduled cash outflows for the repayments of bonds, loans and other financial liabilities, dividends, investments and working capital requirements. When considering uncommitted working capital financing programs, a distinction is made between asset-side structured programs (e.g., factoring) and liability-based programs (e.g., supplier finance). While the latter must be almost fully backed by liquidity reserves due to their dependence on the Group's creditworthiness, the coverage requirement for factoring programs is lower. In addition, allowances are made for deviations from the plan. The liquidity reserve to be held against the liquidity requirements consists of readily available treasury cash, unused committed credit lines with terms of more than one year, planned positive free cash flows, contractually fixed asset disposals and, where applicable, highly liquid securities holdings. The liquidity reserves must exceed the identified liquidity needs for the upcoming 12 months.

Working capital is financed by Group Treasury. A central clearing system performs intra-Group netting on a daily basis. Entities with liquidity surpluses indirectly put these funds at the disposal of entities requiring liquidity. Group Treasury deposits any residual liquidity with its principal banks. This reduces borrowing volume and optimizes net interest income.

Financing is either conducted in the given borrower’s local currency to avoid exchange rate risks or is currency hedged using currency swaps.

voestalpine AG carries contractually guaranteed credit lines of EUR 1,200.0 million (March 31, 2024: EUR 1,000.0 million) as a capitalized liquidity reserve. In addition, cash and cash equivalents in the amount of EUR 781.8 million (March 31, 2024: EUR 1,322.1 million) are reported in the Consolidated Financial Statements. Furthermore, an asset position in the form of freely disposable securities and short-term investments is available to cover any unexpected need for liquidity. As of March 31, 2025, freely disposable securities were EUR 304.4 million (March 31, 2024: EUR 158.2 million). These encompass repo transactions in the form of CO₂ repos (purchases of CO₂ allowances subject to simultaneous repurchase agreements) in the amount of EUR 208.4 million (March 31, 2024: EUR 54.9 million).

The voestalpine Group’s payable bills of exchange may lead to a concentration of risk because liabilities previously distributed among various creditors are now concentrated in the financial institutions involved. Any unilateral withdrawal by one or more banks of the arrangements regarding future transactions would lead to short-term liquidity needs. The voestalpine Group manages the concentration of risk by broadly diversifying the relevant financial instruments among different banks. In addition, the risk is mitigated by way of the existing liquidity reserve as well as cash and cash equivalents in the amount of EUR 1,981.8 million (March 31, 2024: EUR 2,322.1 million). As far as the payable bills of exchange are concerned, the largest of the usually ten creditors accounts for EUR 144.0 million (March 31, 2024: EUR 217.6 million), i.e., 7.3% (March 31, 2024: 9.4%), when compared with the liquidity reserve and the cash and cash equivalents. The liquidity risk from reverse factoring liabilities and liabilities with agreements with a payment service provider is considered of minor significance due to the low volume of such liabilities.

The Group’s sources of financing are managed in line with the principle of maintaining independence from individual banks. Accordingly, financing is currently provided by approximately 20 different domestic and foreign banks. In addition, the capital market is used as a source of financing.

In the business year 2024/25, the following capital market transaction was effected:

In the business year 2023/24, the following capital market transaction was effected:

A maturity analysis of all financial liabilities existing as of the reporting date is presented below:

As estimated as of the reporting date, the following (prospective) interest expense corresponds to these existing liabilities and to interest hedges with a positive market value:

Credit risk

Credit risk refers to financial losses that may occur due to the non-fulfillment of contractual obligations by individual business partners.

The management of credit risks from investment and derivative transactions is governed by internal guidelines. All investment and derivative transactions are limited for each counterparty, with the size of the limit being contingent on the bank’s rating.

For the most part, cash and cash equivalents are deposited with banks whose credit ratings are good. They are generally invested for the short term. The associated credit risk is therefore considered secondary.

The credit risk associated with derivative financial instruments is limited to transactions with a positive fair value and, in this case, to the amount of the fair value. As a result, solely the positive fair value of the derivative transactions is counted against the counterparty limit. Derivatives are entered into exclusively on the basis of standardized master agreements for financial futures transactions.

The credit risk of the underlying transactions is minimized to a large degree through a large number of credit insurances and bankable securities (guarantees, letters of credit). The default risk related to the Group’s remaining own risk is managed by way of defined credit assessment, risk evaluation, risk classification, and credit monitoring processes. The credit risk of the counterparties to financial contracts is managed by monitoring the given counterparties’ credit ratings and changes in their credit default swap (CDS) levels on a regular basis.

Depending on both the customer structure and the line of business, financial assets are generally deemed to be in default when they are more than 180 days past due or when it is no longer certain that they will be paid in full absent collateral sales.

The maximum theoretical default risk equals the amount at which the receivables are recognized in the statement of financial position.

As most of the receivables are insured, the risk of bad debt losses may be considered minor. There is no concentration of default risk as the customer portfolio is well diversified.

The gross carrying amounts and allowances for trade receivables and contract assets are as follows:

The loss allowances for credit-impaired trade receivables and contract assets have developed as follows:

In the business year 2024/25, the portfolio value adjustments were not affected by any significant individual loss allowances.

Currency risk

The Group’s largest currency position arises from raw materials purchases in USD; however, the global business activities of the voestalpine Group also give rise to currency exposures in various other currencies.

Cash inflows and outflows in the respective currencies are offset through the implementation of rolling foreign currency netting. The natural hedge created in this way mitigates risk. The use of derivative hedging instruments is another option. voestalpine AG hedges budgeted foreign currency payments for a maximum period of 12 months. Longer-term hedging occurs only for contracted projects. The hedging ratio is between 25% and 100% and is determined individually depending on the business model of the respective companies. The further in the future the cash flows, the lower the hedging ratio.

In the business year 2024/25, the net need for US dollars in the voestalpine Group was USD 463.8 million. In particular, the decrease compared to the previous business year (USD 698.7 million) is due to decreased USD requirements for raw materials purchases. The remaining foreign currency exposure, resulting primarily from exports to “non-eurozone countries” and raw material purchases, is significantly lower than the USD risk.

Foreign currency portfolio 2024/25

Based on the sensitivity analysis, as of March 31, 2025, the risks associated with all open positions relative to the Group currency for the upcoming business year are as follows:

Interest rate risks

voestalpine AG is primarily subject to cash flow risks (the risk that interest expenses or interest income will undergo a detrimental change) in connection with variable-interest financial instruments. The positions shown include all interest-rate-sensitive financial instruments (loans, money market, issued and purchased securities, as well as interest rate derivatives).

The primary objective of interest rate management is to optimize the interest expense subject to risk considerations.

The variable-interest positions on the liabilities side of EUR 815.6 million exceed the variable-interest positions on the asset side of EUR 774.0 million as of March 31, 2025, so that a one-percentage-point increase in the money market rate increases the net interest expense by EUR 0.4 million, while a decrease in the interest rate by one-percentage-point reduces the net interest expense by EUR –0.4 million. As of March 31, 2024 the variable-interest positions on the asset side (EUR 1,320.5 million) exceeded the variable-interest positions on the liabilities side (EUR 1,271.7 million), so that a one-percentage-point increase in the money market rate would have led to a decrease in net interest expense by EUR –0.5 million, while a one-percentage-point decrease in the interest rate would have increased the net interest expense by EUR 0.5 million.

The weighted average interest rate for asset positions is 2.40% (2023/24: 3.82%) with a duration of 0.0 years (2023/24: 0.0 years)—including money market investments—and 2.81% (2023/24: 3.13%) for liability positions with a duration of 2.0 years (2023/24: 1.3 years).

Derivative financial instruments

In the business year 2024/25, hedge accounting in accordance with IFRS 9 was used to hedge foreign currency cash flows, interest-bearing receivables and liabilities, and raw materials purchase agreements. In this context, all transactions related to foreign currency and interest rate hedges are hedged in full. In connection with raw material procurement contracts solely the commodity index component is hedged. A hedging ratio of 100% is stipulated in this connection. The hedges are classified as cash flow hedges. Hedge accounting is only applied to a portion of the completed hedge transactions.

The following derivative financial instruments are classified as cash flow hedges:

The hedging volume of key foreign currency hedges is as follows:

The following underlying transactions were hedged:

The cash flow hedge reserve (after taxes) developed as follows:

Derivatives designated as cash flow hedges have the following effects on cash flows and the profit or loss for the period:

The nominal amounts are allocated to the aforementioned maturity buckets as follows:

The following derivative financial instruments are measured at fair value. The associated gains/losses are posted in the income statement:

Categories of financial instruments

The financial liabilities measured at amortized cost, excluding bonds issued, fall under Level 2. Valuation is performed according to the discounted cash flow method, whereby the input parameters for the calculation of the fair values are the foreign exchange rates, interest rates, and credit spreads observable on the market. Using the input parameters, the fair values are calculated by discounting estimated future cash flows at market interest rates.

Bonds issued are measured using Level 1 inputs based on the quoted price as of the reporting date.

The table below analyzes regular fair value measurements of financial assets and financial liabilities. These measurements are based on a fair value hierarchy that categorizes the inputs included in the valuation methods used to measure fair value into three levels. The three levels are defined as follows:

The derivative transactions (Level 2) are measured using the discounted cash flow method by determining the value that would be realized if the hedging position were closed out (liquidation method). The observable currency exchange rates and raw materials prices as well as interest rates are the input for the calculation of fair values. Fair values are calculated based on the inputs by discounting expected future cash flows at market interest rates.

The voestalpine Group recognizes reclassifications between different levels of the fair value hierarchy as of the end of the reporting period in which the change occurred. There were no reclassifications in the business years 2023/24 or 2024/25.

The table below presents the reconciliation of Level 3 financial assets measured at fair value between the opening balance and the closing balance, as follows:

Level 3 includes the equity investment in Energie AG Oberösterreich, which is measured at fair value. The fair value of this entity can be reliably determined based on the valuation report prepared annually for Energie AG Oberösterreich as a whole, taking into account all relevant information.

Significant sensitivities in the determination of the fair values may arise from changes in the underlying market data of comparable entities and in the input factors used to determine the net present value (particularly discount rates, non-current forecasts, plan data, etc.).

The receivables in this portfolio are sold monthly on a rolling basis as part of the Group’s factoring programs. The measurement gains or losses allocable to this portfolio are of secondary significance.

The credit risk associated with a particular debtor is the key factor in the fair value determination of the portfolio entitled “Trade and other receivables held for factoring.” Any increase/decrease by 1% in the established default rates thus would change the fair value of this portfolio at most in the same amount; as a rule, however, the fair value change is disproportionately low, because credit insurance has been purchased for significant portions of the portfolio.

The table below shows the net gains and losses on financial instruments, broken down by measurement category:

Total interest income and total interest expense for financial assets and financial liabilities that were not measured at fair value through profit or loss are as follows:

The impairment loss on financial instruments measured at AC is EUR 8.7 million (2023/24: EUR 6.2 million), and reversals of loss allowances amount to EUR 3.2 million (2023/24: EUR 6.4 million).